The
energy
within
A N N U A L R E P O R T 2 0 0 3
WPS Resources Corporation

Highlights
Year Ended December 31 2003 2002 Percent Change
Consolidated revenues – nonregulated (Millions) * $3,137.6 $ 410.8 663.8
Consolidated revenues – utility (Millions) * 1,183.7 1,050.3 12.7
Margins – nonregulated (Millions) 121.0 71.1 70.2
Margins – utility (Millions) 651.4 631.3 3.2
Income from continuing operations (Millions) * 110.6 118.5 (6.7)
Income available for common shareholders (Millions) 94.7 109.4 (13.4)
Earnings per average share of common stock
Basic income from continuing operations * $3.26 $3.64 (10.4)
Diluted income from continuing operations * 3.24 3.61 (10.2)
Basic income available for common shareholders 2.87 3.45 (16.8)
Diluted income available for common shareholders 2.85 3.42 (16.7)
Dividends per share $ 2.16 $ 2.12 1.9
Book value per share 27.40 24.62 11.3
Common stock price at year end $46.23 $38.82 19.1
Shares outstanding at year end (excludes treasury
stock and shares in deferred compensation trust) 36,621,976 31,808,779 15.1
Total assets (Millions) $4,292.3 $3,671.2 16.9
* Refer to Management’s Discussion and Analysis for explanation of changes in revenue and a discussion of discontinued operations.
Ca s h Fl ow S u m m a r y
Year Ended December 31 (Millions) 2003 2002 2001
Net cash operating activities $ 62.4 $188.5 $144.1
Net cash investing activities (244.0) (265.4) (134.8)
Net cash financing activities 198.6 93.1 33.6
Change in cash and cash equivalents – continuing operations $ 17.0 $ 16.2 $ 42.9
2003 Earnings By Segment (Millions)
G A S U T I L I T Y, $15.7
W P S E N E R G Y S E RV I C E S , $29.0
E L E C T R I C U T I L I T Y, $60.0
W P S P OW E R D E V E LO P M E N T, $(7.9)
TOTA L E A R N I N G S $94.7
OT H E R , $(2.1)
1 W PS R E S O U R C E S CO R P O R ATI O N

At A Glance
WPS Resources Corporation
WPS Resources Corporation
Wisconsin Public
is a holding company based Service Corporation
in Green Bay, Wisconsin. Upper Peninsula
Subsidiaries provide products Power Company
and services in both regulated and
nonregulated energy markets.
Wisconsin Public Service Corporation Upper Peninsula Power Company
Business Business
Established in 1883. Established in 1884.
Regulated electric and natural gas utility. Regulated electric utility.
Operates in northeastern and central Wisconsin and an Operates in primarily rural countryside covering 10 of
adjacent portion of Upper Michigan (see map above). the 15 counties in the Upper Peninsula of Michigan
2,483 employees. (see map above).
171 employees.
Market
Serves 414,370 electric and 300,859 natural gas customers. Market
Provides electric and natural gas products and services Serves 51,556 electric customers in 99 communities.
to residential, farm, commercial, and industrial customers. Provides electric energy to 35 wholesale customers.
Also provides electric power to wholesale customers. Main industries served are forest products, tourism,
Electric operations accounted for 64% and gas operations and small manufacturing.
accounted for 36% of 2003 revenues. Electric revenues are comprised of 88% retail sales
Electric revenues are comprised of 87% retail sales and 13% and 12% wholesale sales.
wholesale sales.
Facilities
Wisconsin customers accounted for 96% and Michigan
customers accounted for 4% of 2003 revenues. Electric generating capacity based on 2004 summer
capacity ratings is 79 megawatts. A peak demand was
Facilities reached on January 22, 2003, with a system demand
Electric generating capacity based on 2004 summer capacity of 154 megawatts.
ratings is 2,206 megawatts, including share of jointly owned Electric property includes 2,826 miles of electric
facilities. A peak demand was reached on August 21, 2003, with distribution lines.
a system demand of 2,185 megawatts.
Electric property includes 20,490 miles of electric distribution
lines, 90% of which are operated at 24.9 kV.
Gas property includes 6,845 miles of gas main, 70% of which
is plastic main, and 85 gate and city regulator stations.
W PS R E S O U R C E S CO R P O R ATI O N 2

The energy within
WPS Energy Services, Inc.
WPS Power Development, Inc.
Both WPS Energy Services, Inc.
and WPS Power Development, Inc.
WPS Energy Services, Inc. WPS Power Development, Inc.
Business Business
Established in 1994. Established in 1995.
Diversified nonregulated energy supply and services company. Owns and operates various nonregulated electric generation
Principal operations in the United States include Illinois, Maine, facilities.
Michigan, New York, Ohio, and Wisconsin. Principal Canadian Owns a portion of a synthetic fuel facility.
operations include Alberta, Ontario, and Quebec (see map Provides electric power generation services.
above).
193 employees.
Provides retail and wholesale products primarily in the northeast
quadrant of the United States and adjacent portions of Canada. Market
Develops nonregulated assets. Operates nationwide and in adjacent portions of Canada
183 employees. (see map above).
Significant focus on the northeast quadrant of the United States.
Market
Operates in the retail and wholesale nonregulated energy Products and Services
marketplace. Provides engineering and management services and operations
Emphasis is on serving aggregated residential and small and maintenance services.
commercial, large commercial, industrial, and wholesale customers Areas of expertise include cogeneration, distributed generation,
in the northeast quadrant of the United States and adjacent generation from renewables, and generation plant repowering
portions of Canada. projects.
Products and Services Facilities
Provides individualized energy supply solutions, structured 74 megawatts of hydro and diesel generation facilities in
products, and strategies that allow customers to manage the state of Maine and in New Brunswick, Canada.
energy needs while capitalizing on opportunities resulting
from deregulation. 503 megawatts of primarily coal-fired generation facilities
in Pennsylvania.
Provides natural gas, electric, and alternate fuel products,
real-time energy management services, energy utilization 259 megawatts of combined cycle and fluidized bed generation
consulting, and project development and management. facilities in upstate New York.
Provides acquisition and investment analysis, market 50-megawatt cogeneration facility inCombined Locks,Wisconsin.
management services, and optimization of energy assets 53-megawatt coal-fired generation facility in Cassville,Wisconsin.
in the competitive marketplace. A minority interest in a synthetic fuel facility located in Kentucky.
Patented DENet® computer technology allows customers Landfill and wood waste gas generating facilities in Wisconsin
to continuously monitor and actively manage their and steam boilers in other states.
energy usage.
W PS R E S O U R C E S CO R P O R ATI O N 3

Contents
1 Highlights
2 WPS Resources Corporation
At A Glance
4 Letter to Shareholders
10 The Energy Within
16 Forward-Looking Statements
17 Management’s Discussion
and Analysis
47 Consolidated Statements
of Income
48 Consolidated Balance Sheets
49 Consolidated Statements of
Common Shareholders’ Equity
50 Consolidated Statements
of Cash Flows
Wisconsin Public Service agreed to
sell to the Wisconsin Department of 51 Notes to Consolidated
Natural Resources more than 5,000 Financial Statements
acres of land near our High Falls hydro
88 Report of Management
plant, and several other areas along
the Peshtigo River in Wisconsin, and 88 Independent Auditors’ Report
donate more than 5,000 acres to the 89 Financial Statistics
state. Roger Trudeau, Director of Real
Estate, near the High Falls flowage, is 90 Board of Directors
implementing this agreement, which 90 Officers
ensures the majority of land will
remain accessible to the public and 92 Investor Information
remain in its natural state.
Ka Youa Kong (center), Corporate Recruiter, and
Sandra Hallock (right), Human Resources Information
Coordinator, bring qualified professionals into the
WPS Resources organization.
Pictured on cover, top to bottom: In the Wisconsin Public Service
Rhinelander,Wisconsin, service center, Steve Boneck, Gas Maintenance
Mechanic, and David Detert, Service/Street Mechanic, assemble a
natural gas burner for a gate and regulator station. Sara Hurley,
Manager of Financial Analysis, and Margaret Graese, Accountant,
make sure WPS Power Development’s financial reporting adheres
to current standards.

Larry L. Weyers, Chairman, President, and Chief
Executive Officer of WPS Resources Corporation,
at the historic and newly renovated Meyer
Theatre in Green Bay, Wisconsin.
Dear Fellow Shareholders
The energy within. That’s what makes a company strong. It’s the internal energy that keeps
things rolling within a company. Without this energy, a company would falter. And for a
company in the energy industry, the energy within takes on additional significance.
Our business is energy. We strive to understand that business better than any other company.
Our mission is to provide the best value in energy and related services. Creating value for our
customers, shareholders, employees, and the communities we serve is not a small task. It takes
a tremendous amount of energy to pull it off—energy that comes from our employees. Their
internal drive helps us fulfill our mission and reach our goals. That energy will propel us into
becoming a world-class energy company.
I am happy to report that 2003 put us firmly on track to be that company. We once again
made substantial progress toward our goals, and the energy within is enabling us to succeed.
Let me tell you how.
4 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
A Quick Review of 2003: The Challenges
Many Successes
We also faced a number of challenges during 2003. First,
We filed an application to construct and operate a when approval of Wisconsin Public Service’s 2003 rate case
500-megawatt electric generating facility at our existing was delayed for three months due to other priorities at the
Weston power plant site. Public Service Commission of Wisconsin,we lost approximately
We agreed to sell our Sunbury generating station $5 million of potential electric revenue. We expected to receive
in Pennsylvania to Duquesne Power. an order before the end of 2002, but the Commission did not
grant approval until March 21, 2003. The delay in receiving the
We purchased a one-third interest in the Guardian Pipeline.
needed rate increase caused a decline in utility earnings that we
We increased the dividend on our common stock were not able to overcome during the remainder of the year.
for the 45th consecutive year.
Maintenance issues, purchased power, and fuel costs took a
For the seventh time in eight years, we met the challenge toll on the performance of WPS Power Development’s assets
of a new all-time peak in energy demand when we during 2003. We diligently corrected the maintenance issues,
supplied 2,185 megawatts on August 21. lowered fuel costs, and steadily improved the overall condition
We completed credit line syndications for WPS Resources of the facilities and enhanced their long-term operation.
and Wisconsin Public Service.
The environment in the nonregulated energy marketplace has
We won the bid to provide standard-offer electric service become more challenging due to, among other things, high
to northern Maine for a 34-month period beginning and volatile natural gas prices, major accounting changes, the
March 1, 2004. dramatic overbuild of capacity and, to a lesser extent, the
We agreed to sell the Kewaunee Nuclear Power Plant reduction in wholesale market participants. Although electric
to Dominion Energy. prices have been close to projections made at the inception of our
investments, the forward value of nonregulated capacity markets
We sold an additional 4,025,000 shares of our common
was vastly overestimated by most industry experts and us.
stock at $43 per share, and investor demand exceeded
the number of shares offered. Although WPS Energy Services’ financial performance has been
good the past few years, the overall financial performance by
We issued $125 million of utility senior notes at very
favorable rates. WPS Power Development’s assets is not acceptable.
We sold 542 acres of land near the Peshtigo River In 2003, WPS Power Development took decisive actions
to the Wisconsin Department of Natural Resources. to adjust to the new merchant marketplace. We announced
the pending sale of our Sunbury plant to Duquesne Power.
We began construction of a 50,000-square-foot addition
We downsized the workforce for our New York assets
to our Green Bay Service Center to house our 24-hour
by about 20 percent and have still maintained reliable
call center and additional customer support operations.
operations. We also downsized WPS Power Development’s
We announced a long-term agreement to provide more central office staff and focused the company on the efficient
than 55 megawatts of wholesale electric service to two operation and optimization of its assets. In addition, we
northeastern Wisconsin communities—Shawano moved nonregulated business development activities to
and Clintonville.
WPS Energy Services to facilitate its ability to market power
We completed remediation efforts on a former from WPS Power Development’s generation assets. Given
manufactured gas plant site in Green Bay, Wisconsin, current market conditions, we don’t expect to see significant
and won the Mayor’s Beautification Award at the growth in the form of acquired generation assets, but we
same time. are continuing to look for growth opportunities for our
We sold a seven-acre former manufactured gas plant nonregulated companies that will enhance shareholder value.
site after completing environmental remediation efforts.
WPS Energy Services made adjustments to better integrate
Our NatureWise and SolarWise for Schools renewable
™ ® its market focus with WPS Power Development’s generation
energy programs were ranked among the top 10 in national assets. WPS Energy Services hired personnel with experience in
Green Power programs based on customer participation. the market management of electric generation assets in New
York, New England, and the Pennsylvania-New Jersey-Maryland
markets and opened a new office in the Washington, D.C. area.
W PS R E S O U R C E S CO R P O R ATI O N 5

This staff is focused on maximizing the value of company This past year, 22 percent came from those two subsidiaries,
and customer energy assets in the northeast markets, with which is down from 32 percent in 2002. We have chosen this
activities that include risk analysis, portfolio management, range because it allows us substantial growth opportunities
scheduling, and settlement. and still provides the benefits of a balanced portfolio of
business operations that derives 75 percent or more of our
The energy industry experienced volatile and high
earnings from utility investments.
commodity market prices in 2003, and we expect these
market conditions to continue into 2004. This can put a Our final financial goal is to provide investors with a solid return
financial strain on undercapitalized market participants. We on their investment. That includes sustained dividends and
continue to be diligent and improve our credit processes to dividend growth. Our total return to shareholders has exceeded
minimize credit-related damage. On the plus side, market 12 percent on an average annual basis for the last five years, and
volatility often creates opportunity and enhances the value we have increased dividends annually for the last 45 years.
of the products WPS Energy Services is able to provide to
the nonregulated wholesale and retail marketplace. Strategy
Goals Our strategy continues to be balanced growth, adherence
to our core competencies of energy and energy-related
The energy within an organization is a key to success. But activities, and focusing our nonregulated efforts on the
energy must be harnessed and driven in the direction of goals energy markets within the northeast quadrant of the
with sustained effort. A company must develop its goals, lay United States and adjacent portions of Canada. We are
out its strategy for accomplishing those goals, and then put continuing to place greater emphasis on growth of our
the right leadership in place to ensure attainment of those regulated utility business while at the same time
goals. It takes energy all along the way to keep us headed in carefully growing our nonregulated subsidiaries.
the right direction.
A major part of our strategy is to develop the infrastructure
Our financial goals are simple. We expect to provide 6 to that will be needed to provide reliable supplies of energy
8 percent average annualized growth in earnings per share for many years and to provide customers with the best
from continuing operations, but we know that the growth value for their energy purchases.
may vary—sometimes higher and sometimes lower than the
targeted range in any given year. We have surpassed this goal Generating the Energy
over the past five years. With our strategy in mind, Wisconsin Public Service
Another goal is to have between 15 percent and 25 percent completed construction of Pulliam 31 at a cost of approximately
of our earnings come from our nonregulated subsidiaries: $38 million. This is an 83-megawatt natural gas-fired
WPS Energy Services and WPS Power Development. combustion turbine peaking plant, which is located at our
existing Pulliam power plant site in Green Bay, Wisconsin.
Wisconsin Public Service also began work on the Weston 4
project. This is a new 500-megawatt, coal-fired plant that
will be located at our existing Weston generating site near
Wausau, Wisconsin. This will be a state-of-the-art unit
that we plan to have available in 2008. It will be one of
the most efficient and environmentally friendly units in
Wisconsin and is expected to cost about $770 million.
Pat Bourassa, Technical Support Supervisor, was asked to
take on a new role—project director for the $23.6 million
service center annex project for Wisconsin Public Service.
She brought the building construction portion of this
project in ahead of schedule and under budget. The entire
project is expected to be complete in December 2005.
6 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Wisconsin Public Service also announced a $250 million Managing and Reducing Risk
contract to buy power from a new gas-fired plant Calpine
Another major part of our strategy is the management and,
is building near Kaukauna, Wisconsin. The Fox Energy
when possible, the reduction of risk. In that regard, we made
Center will be available early in 2005 and will provide up
substantial progress in 2003. We will reduce our exposure to
to 235 megawatts of capacity and energy to our system
the merchant plant markets with WPS Power Development’s
for ten years.
proposed sale of the 402-megawatt Sunbury Power Plant,
located in Pennsylvania, to Duquesne Power, L.P., a subsidiary
Transmitting Energy to of Duquesne Light Holdings, for approximately $120 million.
Where It’s Needed We expect to complete this sale in the third quarter of 2004.
Transmission infrastructure must also be developed, and we
made significant progress in that arena in 2003 through our We also reached an agreement to sell the 543-megawatt
partial ownership of American Transmission Company, LLC. Kewaunee Nuclear Power Plant to Dominion Energy
Kewaunee, LLP, a subsidiary of Dominion Resources, for
During 2003, we transferred about $20 million of assets approximately $220 million. Wisconsin Public Service owns
related to the Wausau, Wisconsin, to Duluth, Minnesota, 59 percent of Kewaunee and an unaffiliated utility owns
transmission line project to American Transmission 41 percent. At closing, we expect to receive approximately
Company for additional equity. $130 million in cash, transfer our decommissioning liability,
and retain ownership of trust assets contained in one of two
The Public Service Commission of Wisconsin approved
decommissioning funds we established to cover the eventual
construction of the 220-mile transmission line at a cost of
decommissioning of the plant. The cash proceeds from the sale
about $420 million. We anticipate funding approximately
are expected to slightly exceed our carrying value on the assets
50 percent of total costs incurred, up to $198 million, and
being sold. We expect that the retained decommissioning
receiving additional equity in American Transmission
fund, as well as most of the gain from the plant sale, will be
Company. We expect to complete construction in 2008.
available to Wisconsin Public Service’s customers in future
In December 2003, we invested approximately $6 million in rate proceedings. The transaction is subject to approval by
American Transmission Company with the transfer of other various regulatory agencies, including the Public Service
recently completed projects to the American Transmission Commission of Wisconsin, the Federal Energy Regulatory
Company, increasing our ownership interest to about Commission, and the Nuclear Regulatory Commission.
20 percent. We expect this transaction to be completed in 2004.
We also signed an interconnection agreement with the At the closing of the sale, Wisconsin Public Service will enter
American Transmission Company, which will provide for into a power purchase agreement with Dominion Energy
the development of the transmission infrastructure necessary to buy energy and capacity generated at Kewaunee. The
to transport the output of the proposed Weston 4 plant. agreement provides for an equivalent amount of electricity
at substantially the same costs that we would expect if
Ensuring Reliability with a current ownership continued. The power purchase agreement,
Natural Gas Pipeline which also requires regulatory approval, will extend through
On the natural gas side of our business, we purchased a 2013, when the plant’s current operating license will expire.
one-third interest in the Guardian Pipeline for $26 million.
This sale will transfer the risk of nuclear ownership and
The pipeline, which began operating in 2002, stretches about
operation, including decommissioning and fuel disposal costs,
140 miles from Joliet, Illinois, into southern Wisconsin. It can
away from our customers and shareholders. We believe our
transport up to 750 million cubic feet of natural gas daily.
customers and shareholders will benefit from the sale and power
Even though our principal utility doesn’t connect to it, we’ve
purchase agreement. Additionally, the transaction fits with our
supported the Guardian Pipeline since it was first proposed
asset management strategy and lowers our business risk profile.
because it provides potential benefits of competition to
current and future customers in the state of Wisconsin. The sale of Kewaunee was a bittersweet decision for our
We think it will be a sound addition to our business holdings. management team because Kewaunee has been a flagship for
The pipeline is critical to natural gas reliability in Wisconsin, excellent operations in the industry throughout its 30-year history.
and more than 88 percent of its capacity is under contract We are confident it will continue to operate well in the hands of
through 2012. its new owner and the existing competent staff at Kewaunee.
W PS R E S O U R C E S CO R P O R ATI O N 7

Benefiting from Our As a result, in 2003, WPS Energy Services assumed the
Asset Management Strategy development efforts for our nonregulated businesses.
Our asset management strategy calls for the addition or
disposition of assets, including plants and entire business
Financial Strength
units, to create value for customers and enhance returns
Successful infrastructure development and profitable growth
for shareholders. Sales of excess land, buildings, and other
is possible only if the energy within our company is combined
facilities are a part of this strategy.
with a strong financial position.
The sales of Kewaunee and Sunbury are examples of our
asset management strategy. This strategy will enable us to Rates to Sustain Us
improve returns to shareholders by managing our assets in The ability to successfully conclude rate cases is essential
a manner that reduces risk. for any regulated utility, and we are no different. During
2003, we were successful in a number of jurisdictions.
Another example of our asset management strategy was the
The Public Service Commission of Wisconsin granted
December 2003 sale of an additional 542 acres of land near the
Wisconsin Public Service authority to increase retail electric
Peshtigo River to the Wisconsin Department of Natural Resources
rates by 3.5 percent, or $21.4 million, effective March 21, 2003.
for $6.5 million. This was part of a multi-phase agreement
The Michigan Public Service Commission granted authority
reached in 2001. Under terms of that agreement, we sold
for a $300,000 increase in Wisconsin Public Service’s retail
more than 5,000 acres of land to the state for $13.5 million
electric rates on July 23, 2003, and also authorized recovery of
in 2001. The state recently exercised its option to purchase
$1 million of increased transmission costs through the power
an additional 179 acres for $5 million in 2004. Following
supply cost recovery fuel adjustment clause. In addition, the
the close of the third and final phase of the agreement in 2004,
Federal Energy Regulatory Commission ordered a 21 percent,
we will donate 5,176 acres to the state. At that point, the
or $4.1 million, interim increase in wholesale electric rates,
Wisconsin Department of Natural Resources will have acquired
subject to refund if the final rate increase is less, for
nearly 12,000 acres of wilderness for $25 million. When this
Wisconsin Public Service effective May 11, 2003, with
transaction is completed, it will ensure that this pristine
final settlement anticipated in the second quarter of 2004.
wilderness will remain open and accessible to the public and
in its present natural state. We have been the stewards of this Wisconsin Public Service also successfully concluded its
land for more than 100 years, and it’s important that the new 2004 Wisconsin rate case with authorization to increase
owner, the state of Wisconsin, carry on our stewardship. We retail electric rates by 9.4 percent, or $59.4 million, and retail
are retaining about 300 acres of land in the vicinity that will natural gas rates by 2.2 percent, or $8.9 million, effective
be sold for development at an auction to be held in late 2004. January 1, 2004. As part of this order, the Commission
We also sold a seven-acre waterfront site for $940,000 to allowed a 12 percent return on equity with 56 percent
the city of Oshkosh, Wisconsin, for park expansion. The equity in our utility capital structure.
land was the site of a coal gasification plant on which we Rate increases of this sort are often hard on our customers,
completed environmental remediation work. We are pleased but the increased rates are needed to maintain the reliability
that Oshkosh residents will be able to take advantage of and safety of our service to them. Our customers should
this property to develop and improve the riverfront. know that we are taking advantage of every opportunity
to reduce costs and passing those savings on to them. Even
Nonregulated Growth with the higher rates, our electric and natural gas rates are
Another major part of our strategy is the continuing still among the lowest in Wisconsin and the nation.
growth of WPS Energy Services. We made substantial
progress in 2003 with the acquisition of a retail electric
Financial Goals for 2004
business in Michigan and integration of a retail natural gas
Grow our earnings per share from continuing operations at
business in Canada. WPS Energy Services also secured major
6 to 8 percent on an annualized basis.
new contracts in the New Jersey and Maine markets. They
Achieve 15 to 25 percent of our earnings from WPS Energy
are well on the way to many years of profitable growth.
Services and WPS Power Development.
We also decided that the time was right to take WPS Power Continue our moderate growth in the annual dividend paid.
Development in a new direction—one focused more on Provide investors with a solid return on their investment.
operational excellence than on development of power plants.
8 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Financings we are upgrading leaders’ skills throughout the company.
Leadership training courses have been developed for new
In 2003, we took steps to enhance our strong financial
leaders, new hires, and experienced leaders. More than
position. In August, we completed a credit line syndication
83 percent of our formal leaders have been involved in these
that established a $225 million revolving credit line for
classes in the past 24 months. We use external courses to
WPS Resources and a $115 million revolving credit line for
augment our internal initiatives.
Wisconsin Public Service. The 364-day senior unsecured
revolving credit line facilities give us greater financial flexibility Recognizing the energy that can be created by a diverse
as we grow our regulated utilities and nonregulated businesses. workforce, we are continuing our diversity efforts throughout
WPS Resources. This initiative provides us with a workforce
Our quality debt ratings provide flexibility and access to
and culture that is rich in ideas and highly effective.
capital markets at reasonable rates to help grow the business.
This was apparent in December when we successfully
issued $125 million of 4.80 percent 10-year senior notes
Leadership Changes
for Wisconsin Public Service. Due to the high ratings of the
This past year brought about changes in our Board of
utility issue, the notes were heavily oversubscribed prior
Directors. Mike Ariens retired from our Board after serving
to pricing, which resulted in a very favorable interest rate.
for 29 years. We thank Mike for the tremendous contribution
We also completed an equity sale last fall, which netted he made to our success throughout that term.
$167 million. These debt and equity financings will help We are pleased to welcome Ellen Carnahan to our Board of
maintain our financial strength as we grow. We are maintaining Directors. Ellen has a strong background in venture capital.
our financial strength to support our quality credit ratings. She is proving to be a valuable asset to our future success.
Benefits for our Shareholders On our management team, Jerry Mroczkowski retired from his
position as Chief Executive Officer of WPS Power Development.
We’ve paid a dividend on our common stock for
Jerry has agreed to continue as a consultant for the company.
63 consecutive years, and we’ve rewarded our shareholders
with 45 consecutive years of dividend increases. We feel it is Charlie Schrock left his position as President of WPS Power
extremely important for us to continue to pay dividends to Development for an assignment at WPS Resources. Charlie is
our shareholders, and we’ll continue to strive to do so. now responsible for several projects critical to our success.
Our successful public offering of 4,025,000 shares of common In addition to his role as Senior Vice President - Development
stock in November was oversubscribed, split about evenly of WPS Resources, in which he oversees all nonregulated
between retail and institutional purchasers, and confirms the activity, Phil Mikulsky is now President of WPS Power
value of our company to the investing public. During 2003, Development and will take responsibility for moving this
we increased our common stock equity through that public nonregulated subsidiary in a new direction.
offering and increased investor participation in our Stock
Investment Plan. In 2003, shareholders invested more than The Energy Within
$13.1 million to add additional shares to their accounts under
the plan and reinvested about $10.1 million of dividends. WPS Resources truly does have energy within. It is the force
that keeps us strong and successful. It enables us to deliver
Our investors are recognizing the value of their WPS investment the best value in energy and related services. It allows us to
as our stock increases its value. We closed the year 2002 with a provide solid returns for our investors.
stock price of $38.82 and ended 2003 with a stock price of
$46.23. The 52-week range was between $36.80 and $46.80. We plan to nurture the energy within and continue delivering
For investors who held WPS common stock from December 31, value to our shareholders for many years to come.
2002, through December 31, 2003, and were able to reinvest their Thank you for choosing WPS Resources for your investment.
$2.16 in dividends per share, their total shareholder return for the We will put all our energy to work for you.
year was 25.3 percent—a very positive result for our investors.
Sincerely,
Energized Leadership
The energy within WPS Resources must be combined with Larry L. Weyers
Chairman, President, and Chief Executive Officer
strong leadership to provide maximum value. In that regard, March 12, 2004
W PS R E S O U R C E S CO R P O R ATI O N 9

The
energy
within
At the Wisconsin Public Service garage in Oshkosh,
Wisconsin, James Martin (left),Manager – Customer Service,
and Jody Dixon, Lead Fleet Mechanic, use a scanner to
diagnose electrical problems in our truck engines.
The Energy Within
WPS Resources’ subsidiaries use their abilities to generate and deliver energy to homes and
businesses across the central and northeastern United States and adjacent areas of Canada. That’s
the kind of energy most people think of when they hear “WPS Resources.” But what about the
energy needed to listen intently to our customers, to serve our communities with compassion,
and to persevere in difficult times? That energy doesn’t come from a generator, pipe, or wire.
It’s an energy that resonates within each of WPS Resources’ employees.
The Energy to Serve
The energy within our employees is, first and foremost, the energy to serve our customers
exceedingly well. Whether that means repairing a broken gas main in below-zero weather
or helping customers find ways to effectively use the energy we sell, our employees get the
job done with spirit and integrity. We create products and services that are valuable to our
customers, and in the end, create value for our shareholders as well.
“There’s Energy in Everything We Do”
At Wisconsin Public Service, our regulated electric and natural gas utility operating in northeastern
Wisconsin and portions of Upper Michigan, we tell customers, “There’s Energy in Everything
We Do”—and there is, according to feedback from our customers. In benchmarking research we
conducted in 2003, Wisconsin Public Service rated among the “best in class” when compared with
10 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
other major investor-owned utilities in Wisconsin. Attributes from WPS Energy Services, our nonregulated energy
investigated in the research included price, corporate marketing subsidiary. This surge in business was prompted,
character, and service quality. in large part, by an independent article in the Akron Beacon-
Journal. The reporter stated that “after checking out all the
We spend a great deal of energy searching for new ways to
prices, doing the math, and talking with each company,”
serve our customers better. We look for innovations that are
WPS Energy Services was the obvious choice for gas supply.
convenient and customized for homeowners and businesses
but that also enable us to provide service efficiently and at Consumers flocked to http://www.wpsenergy.com. The site
a lower cost. received 2.5 million hits in August alone, and two customers
per minute signed up online for natural gas service. More
Many of these innovations are on the Web. Some of our
than 40,000 individuals called WPS Energy Services, up
most popular new services are our free on-line “Energy-Saving
700 percent from the usual monthly call volume. That’s a
Tools” for homes and businesses. With Energy-Saving Tools,
remarkable level of interest for an energy supplier to receive
customers are learning ways to manage rising energy costs,
on short notice. But with a firm grasp of Internet technology
based on their own billing data and patterns of energy use.
and a reliable customer service call center, WPS Energy
And, they’re able to do so whenever they choose. The
Services came through for customers. Our reputation in
popularity of these energy management tools, along with
Ohio helped increase our market share by nearly 4 percent
on-line bill payment and other routine transactions available
in a market of 1.2 million customers.
on our Web site, brought double the number of visitors to
http://www.wisconsinpublicservice.com in 2003 as WPS Energy Services’ reputation for a strong work ethic has
compared with 2002. earned our company an ever-increasing amount of business.
Since 2001, WPS Energy Services has been the supplier of
Questions posed by small business customers receive
choice for aggregated buying groups like Cleveland, Ohio.
specialized attention in the Wisconsin Public Service Business
In 2003, Northern Maine again chose us as its standard
Information Center. These representatives are trained
offer energy supplier. Under a 34-month contract, we will
to meet the unique energy needs of small business managers
be the electricity provider for all of Maine Public Service
and owners, who wear many hats in their operations and
Company’s service area, as well as customers of Houlton
have little time or money to spend on energy issues. Making
Water Company and the Eastern Maine Electric Cooperative.
optimum use of phone and Internet technology, the Business
Information Center cared for nearly twice as many business With a focus on competitive energy prices, reliable energy,
customers in 2003 as compared to 2002. At the same time, top-notch customer service, and innovative technology,
the cost of serving each of those customers via the Business WPS Energy Services is one of the fastest-growing energy
Information Center was cut in half. marketers in the country.
These creative on-line and call center solutions for our
residential and small business customers have allowed us
to centralize many functions previously carried out by local
offices. So while we have more opportunity to serve, our
customers can choose the way they want to be served,
and costs are actually reduced.
“Check the Prices, and Do the Math”
In early fall, more than 45,000 new residential and small
business customers in Ohio signed up to buy natural gas
Strategy provides focus for the energy within. It is a constant
behind all decisions made by WPS Energy Services’ staff. This
includes, from left to right, Craig Avery, Risk Administration Leader;
Richard Bissing, Vice President; Daniel Verbanac, Senior Vice
President, who recently was appointed Chief Operating Officer;
Ruqaiyah Stanley, Vice President; and Bruce Rizor, Vice President –
Structured Energy Trading.
W PS R E S O U R C E S CO R P O R ATI O N 11

The Energy to Inspire Small businesses are a case in point. They’re the constant
Greatness heartbeat behind the economic vitality of any community.
In Columbus, Ohio, where WPS Energy Services serves a
WPS Resources is generating a ready supply of talented significant portion of the residential and small business
leaders who can continue our tradition of outstanding, market, our employees work closely with the local chamber
reliable service to customers. Our forward-looking Mentoring of commerce, helping members make sound energy choices.
Program, for example, is in its fourth year. In Maine, our involvement with the Maine Technology
Institute is helping to promote new business in the state’s
Mentoring is a powerful, time-tested way of supporting
technology sector.
employees as they meet the challenges of being successful,
productive employees. Right now in our formal mentoring Elsewhere, our employees are in schools, helping the very
program, 75 mentors—seasoned leaders with specialized young become the leaders of tomorrow. From tutoring
experience—are bringing mentees access to developmental elementary school children who have English as a second
assignments, senior executive relationships, and growth language to leading teenagers in Junior Achievement,
opportunities. In return, these yearlong relationships are we’re using our energy to inspire greatness.
bringing a fresh perspective to our mentors, and the
company is adding to a bank of strategic knowledge Energy to Overcome
and potential leadership. Adversity
At WPS Resources, new leaders prepare to lead effectively by
Not every day is business as usual. That’s when our
participating in our specially designed Leadership Training for
employees draw from their reserves of energy to take
New Leaders. This series of workshops focuses on how to lead
their daily dedication even further.
using WPS Resources’ corporate values and vision. It includes
leadership basics as well as the five core competencies we have
designated for all of our leaders: Coaching and Developing Recover Habitat and Riverway
Others, Communication and Influence, Sales Ability and On May 14, 2003, a fuse plug and its foundation failed at
Negotiation, Planning and Organizing, and Managing and Silver Lake reservoir, operated by Upper Peninsula Power
Valuing Diversity. In their final class, graduates of this program Company, our regulated electric utility in Upper Michigan.
develop an ongoing development plan for themselves, so they The flooding that followed disrupted power supply to some
continue to grow as leaders. More than 200 individuals have consumers in the Upper Peninsula and damaged property
completed this program over the past two years. along the Dead River. This incident tested the mettle of our
employees and confirmed the value of teamwork between
But planning for future success doesn’t stop there. At
Upper Peninsula Power’s work groups.
WPS Resources, we believe in inspiring future success even
beyond our “four walls.” In the communities we serve, spirited Upper Peninsula Power employees immediately began
employees give their time to help people and businesses thrive. working with local officials to ensure the safety of area
residents. Within days, our hydroelectric managers
conducted a flyover of the 25-mile stretch of rivers from
the reservoir to Lake Superior and gained an understanding
of the waters’ status. Portable diesel generators helped us
fill our customers’ energy needs. And our Environmental
Department arrived on the scene, identifying areas of
environmental concern.
Gary Delveaux (center), Manager – Business and Community
Development for Wisconsin Public Service, discusses plans for
a new industrial park with Green Bay Mayor Jim Schmitt (left),
and Pete Thillman (right), Director of Economic Development
for Green Bay. Gary advises on infrastructure and helps promote
the new park to attract businesses.
12 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Above: Charlotte Ostrowski, a Service Clerk, greets
customers with a smile in Wisconsin Public Service’s
customer walk-in center in Merrill,Wisconsin. Our
walk-in centers will be redesigned by the end of 2004
to increase efficiency and better utilize our workforce.
At right:Wisconsin Public Service owns and operates
several hydroelectric dams in Wisconsin and Upper
Michigan. Mark Nelezen, Operator and Maintenance
Mechanic, is one of the employees responsible for
safe and efficient operations at our High Falls,
Wisconsin, hydro facility.
Since then, the recovery effort has been ongoing. Our formal security measures, led by Chief Security Officer
Upper Peninsula Power, with assistance from the Tom Meinz and our Managers of Physical and Cyber Security,
Natural Resource Conservation Service, seeded a portion have increased tenfold over the past few years and have
of Silver Lake, graded and stabilized the new channel become engrained into our daily activity.
formed by the flood, and conducted an initial environmental
All of our employees know they have the power and the
assessment of the entire riverway from Silver Lake up to
responsibility to protect their work space. Controlled access,
Lake Superior. This assessment determined the stability of
formal security procedures, and an acute awareness of our
the river banks, as well as the flood’s impact on aquatic
surroundings combine for our best defense. At WPS Resources,
habitat, and told us what steps were still needed.
we’re doing the best job we can to protect “our homeland”—our
Upper Peninsula Power will continue working cooperatively workplace and community—during times of national threats.
with the Federal Energy Regulatory Commission, state and
local governments, state regulatory agencies, and local property The Energy to Grow
owners toward recovery of the river area in 2004 and beyond.
This will include a study of the economic feasibility of As the communities we serve grow and see success, so does
rebuilding Silver Lake and restoring recreational use of the area. our company. At Wisconsin Public Service, more homes and
businesses are driving the need for additional electric generation.
Protect Our Part of the Homeland On September 26, 2003, Wisconsin Public Service officially
Energy stands steadfast behind the achievements of our country applied to the Public Service Commission of Wisconsin
and modern society. For that reason, the U.S. Department of to build a new 500-megawatt electric power plant called
Homeland Security has included energy companies among the “Weston 4.” The plant, to be fueled using clean coal
many organizations who must take extra measures to protect technology, would be located on the company’s existing
themselves and their surroundings in light of world events. Weston power plant site near Wausau, Wisconsin.
W PS R E S O U R C E S CO R P O R ATI O N 13

14 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
In itself, building a new power plant isn’t a tremendously In 2003, we took decisive actions to adjust to the new
unusual idea. But the way we’re doing it is. We strongly merchant marketplace. Most notably, we announced plans
believe in the underlying principal that building a power plant to sell our Sunbury plant—a move that will reduce our risk
is a community issue calling for community involvement. in the merchant market. We’ll close on this transaction in
summer 2004 if the plant’s buyer, Duquesne Power, receives
Since first announcing our plans to build a plant,
approval by the Pennsylvania Public Utility Commission
Wisconsin Public Service has taken extraordinary steps to
and other needed regulatory approvals.
involve and seek the opinions of the local community. One
of our first moves was to form a Community Advisory Selling Sunbury fits well into our balanced portfolio and
Panel. This group of community leaders, business people, asset management strategy, reducing uncontracted merchant
and residents is a valuable sounding board for our ideas exposure and allowing us to focus our energies on markets
and a great way to keep our hands on the pulse of the that are more in line with our growth strategy.
community. Panel members meet monthly with our
WPS Resources continues to believe that success on the
Weston 4 team, discussing issues such as emissions control,
nonregulated side of our business is achievable in markets
aesthetics of the plant, and employment and tax benefits
where we can both sell energy and operate, or contract for,
for the local community.
physical assets—thus fully integrating the energy services
We also meet proactively with neighbors of the plant we offer the market.
site and the public to keep them updated and allow
everyone to be heard. Listening has led to several The Energy to
innovations in plans for the plant, including a “loop track” Remain Strong
that will reduce rail traffic and noise caused by coal cars.
No matter where we operate, no matter which part of
At WPS Power Development, WPS Resources’ nonregulated WPS Resources our employees work for, one thing is clear—
power producer, strategy is focused as well on the pulse we are all about energy. Knowing this helps us funnel our
of local communities and regions. personal energies into doing the best job possible for our
The energy marketplace WPS Power Development operates customers. And, it prevents us from entering business lines or
within has become more challenging, with extreme volatility, markets that could bring unreasonable risk to our shareholders.
high gas prices, and new regulations and accounting rules, In 2003, corporations—especially energy companies—
among other issues. The value of these markets was continued to be faced with public uncertainty. The news
overestimated by many in the industry, including us. media provided additional coverage of corporate America’s
struggles with ethics, and energy prices across the country
were on the rise and volatile.
Top: Over the past two years,Wisconsin Public Service employees
According to research by Wisconsin Public Service in 2003,
have cut their outage response time from 56 minutes to
customers’ trust in our principal subsidiary, Wisconsin Public
28 minutes—a self imposed goal that makes customers’ lives
Service, actually increased during this time. That confirms
easier. Brian Anderson, Lead Line Electrician, and Jarrod Wurz,
something we have always known: we are a company of
Line Electrician, in Wausau, Wisconsin, work in all kinds of
integrity. Corporate character isn’t just something we proclaim;
weather conditions to meet this goal.
it comes to life in the way our employees perform every day.
Far left: The Weston 4 Power Plant project is moving forward
with the guidance of a cross-functional team. Some key
members include, left to right, Daniel Yagodinski, Project Creating a World-Class
Manager; Kathy Hartman, Manager – Public Affairs; and Kelly Energy Company
Zagrzebski, Corporate Community Relations Leader. Weston 4 At WPS Resources, our vision is “People Creating a
is scheduled for completion in 2008. World-Class Energy Company.” The simplicity of these
Left: Okho Bohm, Customer Solutions Project Leader, and Jeffrey words simultaneously provides a single direction for our
DeLaune, Technical Research and Development Project Leader, company and allows for the ingenuity to get things done.
develop demand response programs for customers of Wisconsin
Our companies are fueled by hardworking, ethical
Public Service. These new programs will help customers control
employees, who are focused on getting energy to customers.
costs and help the company manage load and supply.
That’s the energy within WPS Resources.
W PS R E S O U R C E S CO R P O R ATI O N 15

Forward-Looking Statements
This report contains forward-looking statements within the meaning
BASIC EARNINGS PER SHARE of Section 21E of the Securities Exchange Act of 1934. You can
identify these statements by the fact that they do not relate strictly to
3.00
historical or current facts and often include words such as “anticipate,”
“believe,” “estimate,” “expect,” “intend,” “plan,” “project,” and other
similar words. Although we believe we have been prudent in our
2.00
plans and assumptions, there can be no assurance that indicated
results will be realized. Should known or unknown risks or
uncertainties materialize, or should underlying assumptions prove
1.00
inaccurate, actual results could vary materially from those anticipated.
$2.19
$2.28
$1.99
$2.10
$1.76
$2.24
$2.53
$2.75
$3.45
$2.87
Forward-looking statements speak only as of the date on which
they are made, and we undertake no obligation to update any
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 forward-looking statements, whether as a result of new information,
future events, or otherwise. We recommend that you consult any
further disclosures we make on related subjects in our 10-Q, 8-K,
and 10-K reports to the Securities and Exchange Commission.
DIVIDENDS PER SHARE
The following is a cautionary list of risks and uncertainties that
may affect the assumptions that form the basis of forward-looking
statements relevant to our business. These factors, and other factors
2.00
3.0 not listed here, could cause actual results to differ materially from
those contained in forward-looking statements.
1.50
2.0 The pending sales of our Sunbury generation plant
1.00 and our Kewaunee nuclear power plant
Completion of planned hydro sales
1.0
$1.80
$1.84
$1.88
$1.96
$2.00
$2.04
$2.08
$1.92
$2.16
$2.12
.50 General economic, business, and regulatory conditions
Legislative and regulatory initiatives regarding deregulation
00
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
and restructuring of the utility industry, which could affect
costs and investment recovery
State and federal rate regulation, including the inability
to obtain necessary regulatory approvals
Changes in generally accepted accounting principles
C U M U L AT I V E TOTA L R E T U R N *
Growth and competition and the extent and timing of new
business development in the markets of subsidiary companies
200 The performance of projects undertaken or acquired by
subsidiary companies
150 Business combinations among our competitors and customers
Energy supply and demand
100
Financial market conditions, including availability, terms,
and use of capital
$114.44
$101.94
$129.20
$142.58
$108.89
$170.39
$179.74
$201.78
$252.88
$84.75
50
Nuclear and environmental issues
Weather and other natural phenomena
0
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Commodity price and interest rate risk
* Assumes $100 investment in common stock at year-end 1993 and all dividends
Counterparty credit risk
reinvested quarterly. Cumulative total return for the ten-year period is equivalent
Federal and state tax policies
to an average annual return of 9.72%.
Acts of terrorism or war
16 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Management’s Discussion and Analysis
Introduction
WPS Resources Corporation is a holding company, which is exempt from
the Public Utility Holding Company Act of 1935. Our wholly owned
subsidiaries include two regulated utilities, Wisconsin Public Service
Corporation (which is an operating entity as well as a holding company
exempt from the Public Utility Holding Company Act of 1935) and
Upper Peninsula Power Company. Another wholly owned subsidiary,
WPS Resources Capital Corporation, is a holding company for our
nonregulated businesses, including WPS Energy Services, Inc. and
WPS Power Development, Inc.
Our regulated and nonregulated businesses have distinct competencies
and business strategies, offer differing products and services, experience
a wide array of risks and challenges, and are viewed uniquely by
management. The following summary provides insight into the
operations of our subsidiaries.
In Wisconsin Public Service’s
Merrill, Wisconsin, service area,
R E G U L AT E D U T I L I T I E S
George Henrich, Jr.,a Street/Service
Our regulated utilities include Wisconsin Public Service and Upper
Mechanic, takes the time to make
Peninsula Power. Wisconsin Public Service derives its revenues primarily
sure the job is done correctly.
from servicing retail electric and natural gas customers in northeastern
and central Wisconsin and an adjacent portion of Upper Michigan.
Wisconsin Public Service also provides wholesale electric service to market rules. As electric choice occurs, we believe we will lose some
various customers, including municipal utilities, electric cooperatives, generation load but will retain the delivery revenues and margin. Also,
energy marketers, other investor-owned utilities, and a municipal joint the capacity that is freed up should be competitive in our marketplace.
action agency. Upper Peninsula Power derives revenues from the sale Deregulation of electricity is present in Michigan; however, no customers
of electric energy in the Upper Peninsula of Michigan. have chosen an alternative electric supplier and no alternative electric
The ability of our regulated utilities to earn their approved return on suppliers have offered to serve any customers in Michigan’s Upper
equity is dependent upon accurate budgeting and forecasting techniques, Peninsula due to the lack of transmission capacity in the areas we serve
our ability to obtain timely rate increases to account for rising cost in the Upper Peninsula, which is a barrier to competitive suppliers
structures, minimizing the required rate increases in order to maintain entering the market.
the competitiveness of our core industrial customer base and keep these
WPS POWER DEVELOPMENT
customers in our service area, and certain conditions that are outside
WPS Power Development competes in the wholesale merchant electric
of our control, such as macroeconomic factors and weather conditions.
power generation industry, primarily in the midwest and northeastern
An approximately three month delay in receiving retail electric rate
United States and adjacent portions of Canada. WPS Power Development’s
relief played a significant role in Wisconsin Public Service not earning
core competencies include power plant operation and maintenance,
its approved return on equity in 2003. As a result of this delay, we met
waste disposal, and material condition assessment of assets. Revenues are
with the Public Service Commission of Wisconsin and established
derived primarily through the sale of capacity and energy generated from
procedures and fixed timelines for completion of the 2004 rate case in
plant assets through wholesale outtake contracts and into liquid financial
order to allow the Public Service Commission of Wisconsin to rule on
markets, primarily the PJM (Pennsylvania, New Jersey and Maryland),
a more timely basis. These efforts led to a timely rate order for 2004.
New York, and NEPOOL (New England Power Pool) markets, at spot
Even with the higher retail electric rates, Wisconsin Public Service’s
prices or day ahead prices. Historically, risk management activities have
overall electric rates are among the lowest when compared to other
not been utilized significantly at WPS Power Development. Excluding
investor-owned utilities in Wisconsin and across the nation. The
discontinued operations (the operation of the Sunbury generation plant,
approved returns on equity for Wisconsin Public Service and
which is pending sale, and certain other related assets), WPS Power
Upper Peninsula are 12.0% and 11.4%, respectively.
Development has approximately 425 megawatts of existing capacity,
Perhaps the most relevant risk to our regulated utilities is deregulation. with fixed price contracts in place to sell approximately 86 megawatts.
Deregulation of the electric and natural gas utilities has begun in The majority of the remaining 339 megawatts of generation have
Wisconsin, especially for natural gas service. Currently, the largest natural been leased to WPS Energy Services under an operating lease effective
gas customers can purchase natural gas from suppliers other than their January 2004, as discussed in more detail below.
local utility. Efforts are underway to make it easier for smaller natural
WPS Power Development, through its subsidiary ECO Coal Pelletization
gas customers to do the same. In addition, the Public Service Commission
#12 LLC, also owns an interest in a synthetic fuel producing facility. See
of Wisconsin has been studying how to deregulate the state’s electric
Trends, Synthetic Fuel Operation for more information.
supply. We believe electric deregulation inside Wisconsin is at least
several years off as the state is focused on improving reliability by WPS Power Development’s ability to generate revenues is dependent
building more generation and transmission facilities and creating fair upon open access to physical markets and liquid financial markets.
W PS R E S O U R C E S CO R P O R ATI O N 17

Management’s Discussion and Analysis
We are not currently aware of any significant changes in the physical other marketing and retail entities. WPS Energy Services uses derivative
markets in which WPS Power Development operates. In addition, we financial instruments to provide flexible pricing to customers and
believe that financial markets are becoming more liquid with the addition suppliers, manage purchase and sales commitments, and reduce
of large financial players. exposure relative to the volatility of market prices.
WPS Power Development is subject to clean air regulations enforced by The table below discloses future natural gas and electric sales volumes
the United States Environmental Protection Agency and state and local under contract as of December 31, 2003. Contracts are generally one to
governments. New legislation could require significant capital outlays three years in duration. WPS Energy Services expects that its ultimate
that may impact WPS Power Development’s ability to compete with sales volumes in 2004 and beyond will exceed the volumes shown in
regulated utilities, which are allowed recovery of these costs. the table below as it continues to seek growth opportunities.
Oversupply of capacity, low spark spreads (spark spread is the difference
between the market price of electricity and its cost of production), and Forward Contracted
extreme volatility in the price of fuel, energy, and capacity values have Volumes at 12/31/2003 (1) 2004 2005-2007 2008-2009
negatively impacted margins at WPS Power Development. In response Wholesale sales volumes –
to these market conditions, WPS Power Development has taken steps billion cubic feet 95.8 15.1 –
Retail sales volumes –
to adjust to the current wholesale merchant environment. WPS Power
billion cubic feet 173.4 63.2 –
Development has instituted workforce reductions at the central office Total natural gas sales volumes 269.2 78.3 –
and at various New York and Pennsylvania plants. On October 23, 2003,
a definitive agreement was entered into to sell WPS Power Development’s Wholesale sales volumes –
Sunbury generating facility to a subsidiary of Duquesne Light Holdings. million kilowatt-hours (2) 3,176 238 –
Retail sales volumes –
The pending sale of Sunbury will allow WPS Power Development to
million kilowatt-hours (2) 5,133 3,623 37
reduce uncontracted merchant exposure and redeploy capital into Total electric sales volumes 8,309 3,861 37
markets with different risk profiles. In addition, in January 2004,
WPS Power Development entered into operating lease agreements For comparative purposes, future natural gas and electric sales volumes
with WPS Energy Services as part of its asset management strategy. under contract at December 31, 2002, are shown below. Actual electric
This partnership will enable WPS Power Development to focus on and natural gas sales volumes for 2003 are disclosed within Results of
efficient and effective operation of its plants and is expected to reduce Operations, WPS Energy Services’ Segment Operations.
market price risks associated with the merchant generation plants by
utilizing WPS Energy Services’ financial and physical product trading
expertise. WPS Energy Services will utilize various financial tools, Forward Contracted
Volumes at 12/31/2002 (1) 2003 2004-2006 2007-2008
including forwards and options, to limit exposure, as well as to
Wholesale sales volumes –
extract additional value from volatile commodity prices.
billion cubic feet 67.6 9.7 –
Given current market conditions, we do not expect to see significant Retail sales volumes –
billion cubic feet 110.4 26.6 –
growth through the acquisition of generation assets, but we are
Total natural gas sales volumes 178.0 36.3 –
continuing to look for growth opportunities that will allow us to extract
synergies between WPS Power Development and WPS Energy Services Wholesale sales volumes –
that will enhance shareholder value. million kilowatt-hours (2) 3,833 3,147 –
Retail sales volumes –
WPS ENERGY SERVICES million kilowatt-hours (2) 1,966 739 10
WPS Energy Services offers nonregulated natural gas, electric, and Total electric sales volumes 5,799 3,886 10
alternate fuel supplies, as well as energy management and consulting
services, to retail and wholesale customers primarily in the northeastern (1) These tables represent physical sales contracts for natural gas and electric power for
delivery or settlement in future periods. Management has no reason to believe that
quadrant of the United States and adjacent portions of Canada. Although gross margins that will be generated by these contracts will vary significantly from
WPS Energy Services has a widening array of products and services, those experienced historically.
revenues are primarily derived through sales of electricity and natural gas.
(2) WPS Energy Services acquired retail electric operations in Michigan in 2003. Prior
WPS Energy Services’ marketing and trading operations manage power to the acquisition, this operation was an electric wholesale customer of WPS Energy
and natural gas procurement as an integrated portfolio with its retail and Services, therefore forward contracted volumes to this customer at December 31, 2002,
were included in wholesale sales volumes. At December 31, 2003 forward contracted
wholesale sales commitments. In 2003, WPS Energy Services purchased volumes related to this operation were included in retail sales volumes.
electricity required to fulfill these sales commitments primarily from
independent generators, energy marketers, and organized electric power
WPS Energy Services has experienced steady increases in electric and
markets and purchased natural gas from a variety of suppliers under
natural gas sales volumes since its inception, and expects this trend to
daily, monthly, seasonal, and long-term contracts, with pricing delivery
continue as it continues to look for opportunities that fit within its
and volume schedules to accommodate customer requirements.
growth strategy. In 2003, WPS Energy Services grew its retail electric
WPS Energy Services’ customers include utilities, municipalities, business through the acquisition of retail operations in Michigan and
cooperatives, commercial and industrial consumers, aggregators, and participation in the New Jersey Basic Generation Service program.
18 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Natural gas volumes increased as a result of the expansion of its retail
natural gas business in Canada. WPS Energy Services expects to continue
to target acquisitions and participate in generation service programs
within the area it serves. Although revenues are expected to grow in 2004,
we do not anticipate earnings growth in 2004 since 2003 growth included
the favorable settlement of several counterparty liabilities and the
cumulative effect of a change in accounting arising from the required
adoption of Emerging Issues Task Force Issue No. 02-03, “Issues Involved
in Energy Trading and Risk Management Activities,” with requirements
that shifted margin recognition from 2004 to 2003. We anticipate long-
term earnings growth at WPS Energy Services in the range of 15% to 25%.
As a company that participates in energy commodity markets, WPS Energy
Services is exposed to a variety of risks, including market, operational,
liquidity, and credit risks. Market risk is measured as the potential gain
or loss of a portfolio that is associated with a price movement within a
given probability over a specific period of time, known as value-at-risk.
Through the use of derivative financial instruments, we believe we have
reduced our value-at-risk to acceptable levels. Operational risk is the risk
of loss from less than flawless execution of transactions, forecasting,
scheduling, or other operational activities and is common to all Jeff Tomcek, Special Events Coordinator, and retiree
companies participating in the energy marketing industry. WPS Energy Arnie Rentmeester, set up a Wisconsin Public Service
Services’ continued investment in computational infrastructure, business historical booth at Lambeau Field for Green Bay’s
process improvement, employee training, and internal controls has 150th birthday celebration.
helped mitigate operational risk to date. Liquidity risk is an emerging
risk, and one that has historically been less applicable to WPS Energy
Services than many industry participants because of the financial support The other category of risk mentioned above that WPS Energy Services
provided by WPS Resources in the form of guarantees to counterparties. faces is credit risk from retail and wholesale counterparties. In order to
A significant downgrade in WPS Resources’ credit ratings, however, mitigate its exposure to credit risk, WPS Energy Services has implemented
could cause counterparties to demand additional assurances of payment. stringent credit policies. As a result of these credit policies, WPS Energy
WPS Resources’ Board of Directors imposes restrictions on the amount of Services has not experienced significant write-offs from its large wholesale
guarantees WPS Resources is allowed to provide to these counterparties counterparties to date. Write-offs pertaining to retail counterparties were
in order to protect its credit ratings, and WPS Energy Services believes $3.1 million in 2003, or 0.2%, and we believe this write-off percentage is
it would have adequate capital to continue core operations unless within the range experienced by most energy companies. The table below
WPS Resources’ credit ratings fell below investment grade (Standard & summarizes wholesale counterparty credit exposure, categorized by
Poor’s rating of BBB-/Moody’s rating of Baa3). maturity date, as of December 31, 2003 (in millions):
Exposure Exposure Net Exposure of Counterparties
Counterparty Rating (1) Exposure (2) Less Than 1 Year 1 to 3 Years Greater Than 10% of Net Exposure
Investment grade – regulated utility $ 5.9 $ 5.5 $0.4 $ –
Investment grade – other 79.7 75.9 3.8 17.5
Non-investment grade – regulated utility 7.6 7.6 – –
Non-investment grade – other 3.3 3.3 – –
Non-rated – regulated utility 0.9 0.9 – –
Non-rated – other 21.2 17.0 4.2 –
Total exposure $118.6 $110.2 $8.4 $17.5
(1) The investment and non-investment grade categories are determined by publicly (2) Exposure considers netting of accounts receivable and accounts payable where netting
available credit ratings of the counterparty or the rating of any guarantor, whichever agreements are in place as well as netting mark-to-market exposure. Exposure is before
is higher. Investment grade counterparties are those with a senior unsecured Moody’s consideration of collateral from counterparties. Collateral, in the form of cash and letters
rating of Baa3 or above or a Standard & Poor’s rating of BBB- or above. of credit, received from counterparties totaled $6.2 million at December 31, 2003, all
from non-rated counterparties.
W PS R E S O U R C E S CO R P O R ATI O N 19

Management’s Discussion and Analysis
As discussed above, WPS Energy Services is aiding WPS Power Development The decrease in basic earnings per share in 2003 compared to 2002 was
with its asset management, starting in January 2004. Over the past year, largely driven by an $18.2 million decrease in after-tax gains recognized from
WPS Energy Services has positioned itself to mitigate price risks and sales of portions of our interest in a synthetic fuel operation, a $10.0 million
optimize the market value associated with WPS Power Development’s increase in losses from discontinued operations, and a $5.1 million reduction
merchant generation facilities. WPS Energy Services expects to employ a in tax credits recognized from the synthetic fuel operation. These decreases
variety of physical and financial instruments offered in the marketplace were partially offset by an $18.0 million, or 164%, increase in income available
to limit risk exposure associated with fluctuating commodity prices and for common shareholders at WPS Energy Services. Strategic acquisitions,
volumes, enhance value, and minimize cash flow volatility. While risks customer growth, and favorable settlement of certain counterparty liabilities
associated with the power generating capacity, retail electric, and natural contributed to WPS Energy Services’ increased earnings.
gas sales will be commercially hedged, generally accepted accounting
Also impacting basic earnings per share was an increase of 1.3 million in
principles related to recognition of changes in the fair value of derivative
the weighted average number of outstanding shares of WPS Resources’
instruments as represented in Statement of Financial Accounting
common stock in 2003 compared to 2002. The increase was largely
Standards No. 133, “Accounting for Derivative Instruments and Hedging
due to issuing 4,025,000 additional shares through a public offering in
Activities,” as amended and interpreted and Emerging Issues Task Force
November 2003. Additional shares were also issued in 2003 under the
Issue No. 02-03, “Issues Involved in Accounting for Derivative Contracts
Stock Investment Plan.
Held for Trading Purposes and Contracts Involved in Energy Trading and
Risk Management Activities,” will preclude a perfect matching of gains O V E R V I E W O F U T I L I T Y O P E R AT I O N S
and losses from the generating capacity with the physical and financial Utility operations include the electric utility segment consisting of the
hedging instruments in some reporting periods. The result could cause electric operations of Wisconsin Public Service and Upper Peninsula
volatility in the reported earnings of WPS Energy Services. However, Power and the gas utility segment comprising the natural gas operations
the financial impact of this timing difference would be reversed at the at Wisconsin Public Service. Income available for common shareholders
time of physical delivery and/or settlement of the transactions. attributable to the electric utility segment was $60.0 million in 2003
WPS Energy Services is also impacted by earnings volatility associated compared to $61.0 million in 2002. Income available for common
with the natural gas storage cycle, which runs annually from June to March. shareholders attributable to the gas utility segment was $15.7 million
Injections of natural gas into inventory take place in the summer and natural in 2003 compared to $18.4 million in 2002.
gas is withdrawn in the winter months. WPS Energy Services’ policy is to
ELECTRIC UTILITY SEGMENT OPERATIONS
hedge the price risk of all purchases for storage with sales in the over-the-
counter and futures markets, eliminating the price risk for the storage assets.
Current accounting rules allow for the marking to market of forward sales, WPS Resources’ Electric
but do not allow for the marking to market of the related gas inventory. This Utility Segment Results
(Millions) 2003 2002 Change
results in gains and losses that are recognized in different interim periods, but
even out by the end of the storage cycle. At December 31, 2003, there were Revenues $814.1 $763.1 7%
Fuel and purchased power costs 266.3 242.7 10%
pre-tax mark-to-market losses of $2.6 million recorded (related to the natural
Margins $547.8 $520.4 5%
gas storage cycle) that are expected to reverse in the first quarter of 2004.
Sales in kilowatt-hours 14,346.7 14,547.6 (1%)
Electric utility segment revenues increased $51.0 million, or 7%, for the
Results of Operations
year ended December 31, 2003, compared to the year ended December 31,
2002. The increase is largely due to retail and wholesale electric rate
2003 Compared with 2002
increases for our Wisconsin and Michigan customers in accordance with
W P S R E S O U R C E S C O R P O R AT I O N O V E R V I E W new rate orders. Wisconsin Public Service was granted authority to
WPS Resources’ 2003 and 2002 results of operations are shown in the increase retail electric rates 3.5%, effective March 21, 2003, by the
following table: Public Service Commission of Wisconsin. Wisconsin Public Service was
granted authority for a $0.3 million increase in retail electric rates from
WPS Resources’ Results the Michigan Public Service Commission, effective July 23, 2003.
(Millions, except share amounts) 2003 2002 Change The Michigan Public Service Commission also authorized recovery of
Consolidated operating revenues $4,321.3 $1,461.1 196% $1.0 million of increased transmission costs through the power supply
Income available for cost recovery fuel adjustment clause. In addition, the Federal Energy
common shareholders $94.7 $109.4 (13%) Regulatory Commission ordered a 21% interim increase in wholesale
Basic earnings per share $2.87 $3.45 (17%)
Diluted earnings per share $2.85 $3.42 (17%) electric rates for Wisconsin Public Service effective May 11, 2003,
subject to refund to the extent final rates are lower (final rates are
anticipated in the second quarter of 2004). Upper Peninsula Power was
Total revenues increased significantly due to the required reclassification
granted authority to increase retail electric rates by 8.95%, effective
of previously reported 2002 revenues and cost of sales (see WPS Energy
December 20, 2002, by the Michigan Public Service Commission.
Services’ Segment Operations for further information). Total revenues also
increased due to sales volume growth at WPS Energy Services, electric The electric utility margin increased $27.4 million, or 5%, in 2003 compared
utility rate increases, and higher natural gas prices. to 2002. Due primarily to the electric rate increases mentioned above,
20 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
electric margins at Wisconsin Public Service increased $20.2 million, or 4%. The natural gas utility margin for the year ended December 31, 2003,
Electric margins at Wisconsin Public Service were also impacted favorably increased $1.1 million, or 1%, compared to the year ended December 31,
by a change in sales mix in 2003. While total sales volumes remained 2002. The increase in the natural gas utility margin can be attributed to
basically unchanged in 2003 compared to 2002, sales volumes to higher a 1% increase in natural gas throughput volumes in 2003 compared to
margin residential, and commercial and industrial customers increased 2002. Natural gas throughput volumes to our higher margin residential
slightly. The increase in sales volumes to these higher margin customer and commercial and industrial customers increased 6% in the aggregate,
classes reflects growth within Wisconsin Public Service’s service area and mostly as a result of colder weather in 2003 compared to 2002. Natural
recent changes in the economy. These increases were partially offset by gas throughput volumes to our lower margin transport customers
cooler weather during the cooling season for the year ended December 31, decreased 5% due to the rising price of natural gas together with their
2003, compared to the year ended December 31, 2002. Electric margins at ability to use alternate fuel sources.
Upper Peninsula Power increased $7.2 million, or 17%, due primarily to
Despite the modest increase in gas utility margins, gas utility earnings for
the retail electric rate increase mentioned above, partially offset by a 3%
the year ended December 31, 2003, decreased $2.7 million compared to
decrease in sales volumes. The decrease in sales volumes can be attributed
2002. The decline is primarily due to rising operating expenses (primarily
to less favorable weather conditions for the year ended December 31, 2003,
pension and medical costs) together with the decrease in natural gas rates
compared to the year ended December 31, 2002, and customer conservation
mentioned above.
of electricity made necessary due to a flood that occurred earlier in 2003.
Wisconsin Public Service passes changes in the total cost of gas on to
Although the electric utility margin increased, electric utility segment
customers through a purchased gas adjustment clause, as allowed by the
earnings for the year ended December 31, 2003, decreased $1.0 million
Public Service Commission of Wisconsin and the Michigan Public Service
compared to the year ended December 31, 2002. The primary reason for
Commission under regulatory practice.
the decrease in electric utility segment earnings is due to a decrease in
earnings at Wisconsin Public Service attributed to a delay in receiving O V E R V I E W O F N O N R E G U L AT E D O P E R AT I O N S
2003 retail electric rate relief, together with rising operating expenses Nonregulated operations consist of natural gas, electric, and other sales at
(primarily pension and medical costs). Rate relief for our increasing WPS Energy Services, a diversified energy supply and services company,
operating costs was expected on January 1, 2003; however, the increase and the operations of WPS Power Development, an electric generation
in retail electric rates granted by the Public Service Commission of company. WPS Energy Services and WPS Power Development are both
Wisconsin was not effective until March 21, 2003. The delay in receiving reportable segments.
rate relief was a significant factor in our inability to achieve our authorized
12% return on equity in 2003. The decrease in earnings experienced by WPS Energy Services’ income available for common shareholders increased
Wisconsin Public Service was partially offset by a modest increase in to $29.0 million in 2003 compared with $11.0 million in 2002, primarily
earnings at Upper Peninsula Power Company due to the increase in rates. as a result of increased electric and natural gas margins discussed below.
The Public Service Commission of Wisconsin allows Wisconsin Public WPS Power Development recognized a net loss of $(7.9) million in 2003
Service to adjust prospectively the amount billed to Wisconsin retail compared to income available for common shareholders of $24.0 million
customers for fuel and purchased power if costs fall outside a specified range. in 2002. Despite an increase in margins, WPS Power Development’s earnings
Wisconsin Public Service is required to file an application to adjust rates were impacted by a decrease in gains recognized from the sale of portions
either higher or lower when costs are plus or minus 2% from forecasted of its interest in a synthetic fuel operation, increased losses from discontinued
costs on an annualized basis. See Liquidity and Capital Resources – Other Future operations, and a decrease in the amount of tax credits recognized.
Considerations, Regulatory for information on fuel filings related to 2003.
WPS ENERGY SERVICES’ SEGMENT OPERATIONS
GAS UTILITY SEGMENT OPERATIONS Total segment revenues at WPS Energy Services were $3,081.2 million in
2003 compared to $361.2 million in 2002. The total margin at WPS Energy
Services was $86.8 million in 2003 compared to $48.4 million in 2002.
WPS Resources’ Gas
WPS Energy Services’ nonregulated natural gas and electric operations are
Utility Segment Results
(Millions) 2003 2002 Change the primary contributors to revenues and margins and are discussed below.
Revenues $404.2 $310.7 30%
Purchase costs 291.0 198.6 47% WPS Energy Services’
Margins $113.2 $112.1 1% Natural Gas Results
Throughput in therms 854.5 845.4 1% (Millions, except sales volumes) 2003 2002 Change
Nonregulated natural gas revenues $2,696.6 $245.1 1,000%
Gas utility segment revenues increased $93.5 million, or 30%, for the Nonregulated natural gas
year ended December 31, 2003, compared to the year ended December 31, cost of sales 2,652.5 210.2 1,162%
Margins $ 44.1 $ 34.9 26%
2002. The increase in gas utility revenues is mostly due to a 39% increase
in the average cost of natural gas for the year ended December 31, 2003, Wholesale sales volumes in
billion cubic feet * 252.4 233.8 8%
compared to the prior year, partially offset by the 0.3% decrease in retail
Retail sales volumes in
natural gas rates ordered by the Public Service Commission of Wisconsin, billion cubic feet * 240.6 135.7 77%
effective March 21, 2003. * Represents gross physical volumes.
W PS R E S O U R C E S CO R P O R ATI O N 21

Management’s Discussion and Analysis
WPS Energy Services’ nonregulated natural gas revenues increased WPS POWER DEVELOPMENT’S SEGMENT OPERATIONS
$2,451.5 million for the year ended December 31, 2003, compared to All revenues and costs of WPS Power Development’s discontinued
the prior year. Approximately $997 million of the increase relates to operations are combined and reported on a net basis in the WPS Resources
the required adoption of Issue No. 02-03, effective January 1, 2003, Corporation Consolidated Statements of Income for all periods presented.
(see Trends for more information about this accounting change). Volume Accordingly, the table below does not include the results of discontinued
growth driven by the acquisition of a retail natural gas business in operations, which are discussed separately within Discontinued
Canada accounted for approximately $500 million of the increase in Operations below.
revenues in 2003. Most of the remaining increase can be attributed
to higher natural gas prices compared to the prior year. WPS Power Development’s
Production Results
Natural gas margins at WPS Energy Services increased $9.2 million, (Millions) 2003 2002 Change
or 26%, in 2003 compared to 2002. Approximately $6 million of the Nonregulated other revenues $82.4 $59.4 39%
increase related to the November 1, 2002, acquisition of a retail natural Nonregulated other cost of sales 57.9 37.8 53%
gas business in Canada. The remaining increase related to favorable Margins $24.5 $21.6 13%
settlements of pending liabilities with several counterparties, partially
offset by the change in accounting prescribed by the required adoption WPS Power Development’s revenues increased $23.0 million, or 39%, in
of Issue 02-03. See Cumulative Effect of Change in Accounting Principles for 2003 compared to 2002. WPS Power Development’s margin increased
further discussion. $2.9 million, or 13%, in 2003 compared to 2002. The increase in revenues
and margin was primarily the result of increased generation from generating
WPS Energy Services’ assets acquired in New York on June 1, 2002, revenues from the Combined
Electric Results Locks Energy Center that became fully operational in the second quarter of
(Millions) 2003 2002 Change 2002, and an increase in generation at the hydroelectric plants in Maine
Nonregulated electric revenues $382.2 $113.7 236% and Canada as a result of increased rainfall, higher capacity revenues, and
Nonregulated electric cost of sales 341.8 102.6 233% increased pricing on a renegotiated outtake contract. Partially offsetting
Margins $ 40.4 $ 11.1 264% these increases was a decrease in revenues and margins at WPS Power
Wholesale sales in kilowatt-hours * 2,768.0 4,250.0 (35%) Development’s Cassville, Wisconsin, facility as a result of the expiration
Retail sales in kilowatt-hours * 6,435.3 2,703.6 138% of an energy and capacity outtake contract that was not renewed.
* Represents gross physical volumes.
O V E R V I E W O F H O L D I N G C O M PA N Y A N D OT H E R
WPS Energy Services’ nonregulated electric revenues increased S E G M E N T O P E R AT I O N S
$268.5 million for the year ended December 31, 2003, compared to Holding Company and Other operations include the operations of
the prior year. Approximately $130 million of the increase relates WPS Resources and WPS Resources Capital as holding companies and
to the required adoption of Issue 02-03. Another $88 million of the nonutility activities at Wisconsin Public Service and Upper Peninsula
the increase can be attributed to participation in the New Jersey Power. Holding Company and Other operations experienced a net loss
Basic Generation Services program. WPS Energy Services acquired of $(2.1) million in 2003 compared to a net loss of $(5.0) million in 2002.
700 megawatts of fixed price load and 250 megawatts of variable The decrease in the net loss experienced is largely related to an increase
price load for the period from August 1, 2003, to May 31, 2004, as in gains recognized on hydroelectric land sales in 2003 compared to 2002
a result of its participation in this program. The remaining increase (recorded as a component of miscellaneous income), primarily due to
in nonregulated electric revenues can be attributed to increased prices a $6.2 million pre-tax gain recognized in 2003 from land sales to the
and expansion within existing service territories. WPS Energy Services Wisconsin Department of Natural Resources. The sale of these
also acquired retail electric operations in Michigan in 2003. Prior to hydroelectric lands is part of our asset management strategy, which was
the acquisition, this operation was an electric wholesale customer initiated in 2001, and is intended to optimize shareholder return from
of WPS Energy Services; therefore the acquisition did not have a the sale, development, or use of certain assets or entire business units.
significant impact on total revenues in 2003 compared to 2002. The
acquisition did, however account for most of the increase in retail O P E R AT I N G E X P E N S E S
sales volumes and related decrease in wholesale sales volumes in
2003 compared to 2002. WPS Resources’
Operating Expenses
WPS Energy Services’ electric margin increased $29.3 million, or (Millions) 2003 2002 Change
264%, in 2003 compared to 2002. Approximately $26 million of the Operating and maintenance
increase is due to acquisition synergies and improved management expense $459.5 $412.5 11%
of retail operations in Michigan and participation in the New Jersey Depreciation and decommissioning
Basic Generation Service program. The remaining increase in WPS Energy expense 138.4 94.8 46%
Taxes other than income 43.8 39.9 10%
Services’ electric margins is largely due to the impact of the change
in accounting prescribed by the required adoption of Issue 02-03, OPERATING AND MAINTENANCE EXPENSE
which precludes mark-to-market accounting for nonderivative Operating expenses increased $47.0 million, or 11%, for the year ended
trading contracts. December 31, 2003, compared to the year ended December 31, 2002.
Utility operating expenses increased $30.7 million, or 9%, in 2003 compared
22 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
to 2002. Approximately $18 million of the increase reflects higher pension, fuel operation. WPS Power Development recognized a $7.6 million
postretirement medical, and active medical costs. The remaining increase pre-tax gain in 2003 compared with a $38.0 million pre-tax gain in 2002
pertains to costs incurred for plant maintenance related to the Kewaunee related to these sell-downs. An increase in operating losses generated
nuclear power plant’s scheduled refueling outage in 2003 (there was no by the synthetic fuel operation due to increased production decreased
refueling outage in 2002), additional operating expenses at the Kewaunee miscellaneous income by approximately $3.5 million in 2003. The
nuclear power plant, and wage increases. Operating expenses at WPS Energy increased operating losses were driven by our partner’s ability to utilize
Services increased $12.0 million, or 40%, in 2003 compared to 2002, tax credits in 2003 and were offset by minority interest, which is
largely due to costs associated with business expansion, including the discussed below. In the aggregate, the items mentioned above relating
acquisition of a retail natural gas business in Canada and a retail electric to the synthetic fuel operation resulted in a $33.9 million decrease in
business in Michigan. The remaining increase is largely due to higher miscellaneous income.
incentive compensation costs and the costs associated with a full year
The 2003 gain resulted from the 2002 sale of a portion of WPS Power
of operation of generation assets in New York that were purchased
Development’s interest in its synthetic fuel operation. Similar gains
by WPS Power Development in June 2002.
from the 2002 sale are expected to be recognized annually through
DEPRECIATION AND DECOMMISSIONING EXPENSE 2007, dependent upon production at the synthetic fuel facility. The
Depreciation and decommissioning expense increased $43.6 million, or gain reported in 2002 resulted from a 2001 sell-down of a portion of
46%, due primarily to an increase of $37.4 million resulting from increased WPS Power Development’s interest in a synthetic fuel operation,
realized gains on the decommissioning trust assets that resulted in recording which was recognized in its entirety by December 31, 2002.
decommissioning expense approximately equal to the gains recognized
MINORITY INTEREST
in miscellaneous income pursuant to regulatory practice. The increase in
As a result of WPS Power Development’s sale of an approximate 30%
realized gains is due primarily to the change in investment strategy for
interest in its subsidiary, ECO Coal Pelletization #12 LLC, on December 19,
Wisconsin Public Service’s qualified nuclear decommissioning trust assets.
2002, $5.6 million of losses related to the synthetic fuel operation and
Qualified decommissioning trust assets were transferred to more
reported in miscellaneous income were allocated to WPS Power
conservative investments in 2003 pending the sale of the Kewaunee
Development’s partner and reported as a minority interest.
nuclear power plant, thus triggering realized gains. Most of the remaining
increase resulted from plant asset additions at Wisconsin Public Service P R O V I S I O N F O R I N C O M E TA X E S
and WPS Power Development. The effective tax rate was 23.4% in 2003 compared to 19.5% in 2002.
The increase in the effective tax rate in 2003 compared to 2002 is
TAXES OTHER THAN INCOME
largely due to a decrease in tax credits that could be recognized from
Taxes other than income increased $3.9 million, or 10%, primarily due
our ownership interest in a synthetic fuel operation. Tax credits
to an increase in gross receipts taxes paid by Wisconsin Public Service
recognized during the year ended December 31, 2003, decreased
as a result of increased revenues.
$5.1 million compared to the prior year, due to the sale of a portion
OTH E R I N COM E ( EX P E N S E ) of our interest in the synthetic fuel operation on December 19, 2002.
Lower taxable income in 2003 also reduced the amount of tax credits
that could be claimed. Our ownership interest in the synthetic fuel
WPS Resources’ Other
Income (Expense) operation resulted in the recognition of $18.1 million of Section 29
(Millions) 2003 2002 Change tax credits as a reduction of federal income tax expense in 2003
compared to $23.2 million in 2002.
Miscellaneous income $63.6 $47.8 33%
Interest expense and distributions The operations of our synthetic fuel facility generate tax credits, which we
of preferred securities (55.6) (55.8) 0%
use to reduce our current federal income tax liability, with any remaining
Minority interest 5.6 – –
credits increasing our alternative minimum tax credit available for future
Other income (expense) $13.6 $(8.0) –
years. The cumulative amount of credits carried forward at December 31,
MISCELLANEOUS INCOME 2003, relating to our interest in the synthetic fuel facility was $52.3 million.
Miscellaneous income increased $15.8 million for the year ended Based on a review of all known facts and circumstances, management has
December 31, 2003, compared to the year ended December 31, 2002. concluded that it is more likely than not that we will be able to use these
The increase in miscellaneous income is largely due to an increase in credits in the future.
realized gains on the decommissioning trust assets of $36.4 million,
D I S C O N T I N U E D O P E R AT I O N S
which is primarily the result of the change in investment strategy for the
On October 24, 2003, a definitive agreement was entered into to sell
qualified nuclear decommissioning trust assets. The realized gains were
WPS Power Development’s Sunbury generation plant, subject to certain
offset by increased decommissioning expense, as discussed above.
contingencies. As a result of such agreement, we have determined that
Miscellaneous income also increased $6.2 million as a result of the sale of
the operations of the plant and certain other related assets meet the
land to the Wisconsin Department of Natural Resources and $8.1 million
definition of discontinued operations per the provisions of Statement
resulting from an increase in earnings from equity investments.
of Financial Accounting Standards No. 144, “Accounting for the
The increases in miscellaneous income were partially offset by lower gains Impairment or Disposal of Long-Lived Assets.”
from sales of ownership interests in WPS Power Development’s synthetic
W PS R E S O U R C E S CO R P O R ATI O N 23

Management’s Discussion and Analysis
The loss from discontinued operations increased to $22.7 million cumulative change in accounting principle to be recorded effective
($16.0 million after taxes) for the year ended December 31, 2003, January 1, 2003, for all nonderivative contracts entered into on or prior
from $9.9 million ($6.0 million after taxes) for the year ended to October 25, 2002. On January 1, 2003, WPS Resources recorded a
December 31, 2002. The increased loss is largely due to a decrease positive after-tax cumulative effect of a change in accounting principle of
in capacity sales in 2003 due to the expiration of a sales contract, $3.5 million (primarily related to the operations of WPS Energy Services)
an increase in variable production expenses related to increased to income available for common shareholders to remove from its balance
emission costs, and an increase in operating costs. Operating costs sheet the mark-to-market effects of those contracts entered into on or prior
increased in 2003 as a result of issues related to fuel quality and to October 25, 2002, that do not meet the definition of a derivative under
associated mechanical difficulties involving fuel delivery systems Statement No. 133, as amended. The cumulative effect of adopting this
earlier in the year, operational issues related to newly installed new accounting standard is expected to reverse upon the settlement of the
environmental equipment in various boilers, and turbine outages. contracts impacted by the standard. Most of these settlements are expected
The increase in the loss from discontinued operations was partially to occur in 2004. The required change in accounting had no impact on
offset by decreases in payroll and employee benefits as a result of the underlying economics or cash flows of the contracts. In addition, the
a restructuring that took place at the end of 2002. adoption of Statement No. 143 at WPS Power Development resulted in a
$(0.3) million cumulative effect of change in accounting principle related
to the closure of an ash basin at the Sunbury generating plant.
2002 Compared with 2001
W P S R E S O U R C E S C O R P O R AT I O N O V E R V I E W
WPS Resources’ 2002 and 2001 results of operations are shown in the
following table:
WPS Resources’ Results
(Millions, except share amounts) 2002 2001 Change
Consolidated operating revenues $1,461.1 $1,345.4 9%
Income available for common
shareholders $109.4 $77.6 41%
Basic earnings per share $3.45 $2.75 25%
Diluted earnings per share $3.42 $2.74 25%
The increase in basic earnings per share in 2002 compared to 2001 was
largely driven by a gain at WPS Power Development related to the 2001 sale
of part of its synthetic fuel operations. The sale occurred in the fourth quarter
of 2001, and we deferred recognition of a portion of the related gain on the
sale pending the satisfaction of certain contingencies. In addition,WPS Energy
Services’ income available for common shareholders increased 72%, primarily
due to improved natural gas margins. A full year contribution from gas utility
operations acquired in the spring of 2001, warmer than normal weather
during the heating season in 2001, and a rate increase approved by regulators
resulted in increased earnings from our gas utility in 2002.
Jim Barribeau, Jr., a Garage Mechanic for Wisconsin Also impacting basic earnings per share was an increase of 3.5 million in
Public Service in Oshkosh, Wisconsin, welds a rack that the weighted average number of outstanding shares of WPS Resources’
will hold reels of wire for electric installation crews. common stock in 2002 compared to 2001. The increase was largely due
to issuing 2.3 million additional shares through a public offering in the
fourth quarter of 2001 and issuing 1.8 million shares in the merger of
C U M U L AT I V E E F F E C T O F C H A N G E I N Wisconsin Fuel and Light into Wisconsin Public Service in the second
ACCOUNTI NG PRI NCI PLES quarter of 2001. Additional shares were also issued in 2002 under the
WPS Energy Services had been applying the accounting standards of Stock Investment Plan.
Issue 98-10, “Accounting for Contracts Involved in Energy Trading and
O V E R V I E W O F U T I L I T Y O P E R AT I O N S
Risk Management Activities,” from the first quarter of 2000 until this
Income available for common shareholders attributable to electric utility
standard was rescinded by Issue 02-03 in October 2002. WPS Energy
operations was $61.0 million in 2002 compared with $58.8 million in
Services was defined as a trading company under Issue 98-10 and was
2001. Income available for common shareholders attributable to gas utility
required to mark all of its energy related contracts to market. On
operations was $18.4 million in 2002 compared with $8.9 million in 2001.
October 25, 2002, the Emerging Issues Task Force rescinded Issue 98-10,
thus precluding mark-to-market accounting for energy trading contracts Utility margins at Wisconsin Public Service were impacted positively by a
entered into after that date that are not derivatives and requiring a Public Service Commission of Wisconsin interim rate order, which was
24 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
effective January 1, 2002, authorizing a 10.3% increase in Wisconsin An increase in overall natural gas throughput volumes of 14% and the
retail electric rates and a 4.7% increase in Wisconsin retail natural gas Wisconsin retail gas rate increase resulted in a higher gas utility margin of
rates. In late June 2002, Wisconsin Public Service received a final 2002 $20.7 million, or 23%, in 2002. Increased overall gas throughput volumes
rate order that authorized a 10.9% increase in Wisconsin retail electric were partially the result of including 12 months of operations for former
rates and a 3.9% increase in Wisconsin retail natural gas rates. The final Wisconsin Fuel and Light in 2002 compared with the inclusion of 9 months
order authorized a lower retail natural gas rate increase than was of operations in 2001. Gas throughput volumes were also affected by a
approved in the interim order resulting in a $0.4 million refund to heating season that was 5% colder in 2002 than in 2001, but 3% milder
Wisconsin Public Service’s natural gas customers. than normal.
ELECTRIC UTILITY SEGMENT OPERATIONS Wisconsin Public Service’s gas revenues decreased $10.9 million, or 3%,
Our electric utility segment margin increased $84.2 million, or 19%, due in 2002 and gas purchase costs decreased $31.6 million, or 14%, largely as
to the Wisconsin retail electric rate increases at Wisconsin Public Service the result of a 26% decrease in the average unit cost of natural gas in 2002.
and higher overall electric utility sales volumes.
O V E R V I E W O F N O N R E G U L AT E D O P E R AT I O N S
WPS Energy Services’ income available for common shareholders
WPS Resources’ Electric
increased to $11.0 million in 2002 compared with $6.4 million in 2001
Utility Segment Results
(Millions) 2002 2001 Change primarily due to a higher gas margin. WPS Power Development’s income
available for common shareholders increased to $24.0 million in 2002
Revenues $763.1 $675.7 13%
Fuel and purchased power costs 242.7 239.5 1% compared with $2.3 million in 2001 largely due to recognition of a gain
Margins $520.4 $436.2 19% related to the 2001 sale of a portion of its synthetic fuel operations.
Sales in kilowatt-hours 14,547.6 13,532.8 7% WPS ENERGY SERVICES’ SEGMENT OPERATIONS
Our electric utility segment revenues increased $87.4 million, or 13%, Revenues at WPS Energy Services were $361.2 million in 2002 compared
in 2002 as the result of the electric rate increases and an 8% increase in with $326.6 million in 2001, an increase of 11%. The increase was
overall electric sales volumes at Wisconsin Public Service. Sales volumes primarily the result of higher retail natural gas sales volumes in 2002.
were up 25% for lower margin, wholesale customers while sales to higher
margin, residential customers increased 6% and sales to higher margin, WPS Energy Services’
commercial and industrial customers increased 3%. Summer weather Gas Results
was 7% warmer in 2002 than in 2001, and 23% warmer than normal. (Millions, except sales volumes) 2002 2001 Change
Nonregulated natural gas revenues $245.1 $210.1 17%
Increased fuel costs for power generation were partially offset by lower Nonregulated natural gas
purchased power expenses. Fuel expense for generation plants increased cost of sales 210.2 194.2 8%
$4.9 million, or 4%, in 2002. Purchased power expense, however, decreased Margins $ 34.9 $ 15.9 119%
$2.7 million, or 3%, in 2002. Overall generation from Wisconsin Public
Wholesale sales volumes in
Service’s plants increased 10% while purchased volumes decreased 3%. billion cubic feet 233.8 242.8 (4%)
The change in the energy supply mix was largely due to the availability of Retail sales volumes in
less expensive power generation from the Kewaunee nuclear power plant. billion cubic feet 135.7 104.5 30%
Wisconsin Public Service increased its ownership interest in the Kewaunee
nuclear power plant to 59% in September 2001. Although Upper Peninsula Nonregulated gas revenues at WPS Energy Services increased $35.0 million,
Power’s purchased volumes remained fairly consistent, the unit cost of its or 17%, in 2002 primarily as the result of higher natural gas sales volumes
purchased power decreased 9%. in 2002. The nonregulated gas margin increased $19.0 million, or 119%,
in 2002 due to improved management of the retail gas procurement and
As discussed previously, the Public Service Commission of Wisconsin volume risk processes and increased retail sales volumes.
allows Wisconsin Public Service to adjust prospectively the amount billed
to Wisconsin retail customers for fuel and purchased power if costs fall WPS Energy Services’
outside a specified range. Wisconsin Public Service did not submit any Electric Results
fuel filings in 2002. (Millions) 2002 2001 Change
Nonregulated electric revenues $113.7 $112.7 1%
GAS UTILITY SEGMENT OPERATIONS Nonregulated electric cost of sales 102.6 99.4 3%
Effective April 1, 2001, the gas utility margin at Wisconsin Public Service Margins $ 11.1 $ 13.3 (17%)
includes the merged Wisconsin Fuel and Light Company operations.
Wholesale sales in kilowatt-hours 4,250.0 1,696.6 151%
Retail sales in kilowatt-hours 2,703.6 1,944.7 39%
WPS Resources’ Gas
Utility Segment Results Nonregulated electric revenues at WPS Energy Services increased
(Millions) 2002 2001 Change $1.0 million, or 1%, in 2002 due to higher sales volumes. The nonregulated
Revenues $310.7 $321.6 (3%) electric margin decreased $2.2 million, or 17%, in 2002 primarily due to
Purchase costs 198.6 230.2 (14%) the slow economy, which produced less favorable market conditions for
Margins $112.1 $ 91.4 23% opportunity sales in 2002.
Throughput in therms 845.4 742.7 14%
W PS R E S O U R C E S CO R P O R ATI O N 25

Management’s Discussion and Analysis
WPS POWER DEVELOPMENT’S SEGMENT OPERATIONS OPERATING AND MAINTENANCE EXPENSE
Operating and maintenance expense increased $79.5 million, or 24%, for
WPS Power Development’s the year ended December 31, 2002, compared to 2001. Utility operating
Production Results and maintenance expense increased $67.6 million in 2002 largely due to
(Millions) 2002 2001 Change amortization of regulatory deferrals, increased benefit costs, higher
Nonregulated other revenues $59.4 $56.6 5% transmission expenses associated with American Transmission Company,
Nonregulated other cost of sales 37.8 48.7 (22%) increased expenses at the Kewaunee nuclear power plant (as a result of
Margins $21.6 $ 7.9 173% Wisconsin Public Service acquiring additional ownership interest in the
plant), and increased energy conservation expenses. Operating and
Revenues at WPS Power Development were $59.4 million in 2002 compared maintenance expenses at WPS Energy Services increased $7.3 million
with $56.6 million in 2001, an increase of 5%. The increase was primarily in 2002, largely due to costs associated with business expansion and
due to the operation of the generation assets acquired in New York in the increased bad debt expense. Operating expenses at WPS Power
second quarter of 2002 and the operation of the Combined Locks Energy Development increased $4.3 million in 2002 primarily due to costs
Center. As new generation assets are acquired or constructed, WPS Power associated with the generation assets in New York that were purchased
Development’s output is increased, providing new sales opportunities. by WPS Power Development in June 2002 and operation of the
Partially offsetting these increases were a change in accounting from Combined Locks Energy Center.
consolidation to equity method accounting for WPS Power Development’s
synthetic fuel operations and lower revenues from steam sales. DEPRECIATION AND DECOMMISSIONING EXPENSE
Depreciation and decommissioning expense increased $10.7 million, or
WPS Power Development experienced an increase of $13.7 million, 13%, for the year ended December 31, 2002, compared to 2001. Utility
or 173%, in its margin in 2002. The operation of the generation assets depreciation and decommissioning expense increased $7.8 million in
acquired in New York and the startup of the Combined Locks Energy 2002 largely due to additional plant assets at Wisconsin Public Service,
Center contributed to WPS Power Development’s higher margin in 2002. including its increased ownership interest in the Kewaunee nuclear
A change in accounting for WPS Power Development’s synthetic fuel power plant. Lower depreciation expense of $5.5 million related to
operations also increased 2002 margins by approximately $4.3 million. decreased decommissioning earnings partially offset the increased plant
As a result of the November 2001 sale of a portion of WPS Power asset depreciation. WPS Power Development’s depreciation expense
Development’s synthetic fuel operations, WPS Power Development no increased $2.4 million in 2002 due to additional plant assets, including
longer consolidates these operations as a part of revenue and cost of the Combined Locks Energy Center and the assets obtained in the
sales. After the sell-down, WPS Power Development became a minority CH Resources acquisition. Depreciation and decommissioning expense
owner, and therefore accounts for its interest in the synthetic fuel at WPS Energy Services did not change significantly from the prior year.
operations under the equity method of accounting. As a result of no
longer consolidating the synthetic fuel operations, WPS Power Development’s TAXES OTHER THAN INCOME
margins increased because this business had negative margins in 2001. Taxes other than income increased $3.2 million, or 9%, primarily due
to an increase in gross receipts taxes paid by Wisconsin Public Service
O V E R V I E W O F H O L D I N G C O M PA N Y A N D as a result of increased revenues.
O T H E R S E G M E N T O P E R AT I O N S
Holding Company and Other operations experienced a net loss of OTH E R I N COM E ( EX P E N S E )
$(5.0) million in 2002 compared with income available for common
shareholders of $1.3 million in 2001. A net loss was experienced in 2002 WPS Resources’ Other
primarily due to interest expense from financing to provide funds for Income (Expense)
subsidiary operations. (Millions) 2002 2001 Change
Miscellaneous income $47.8 $ 37.5 27%
Hydro land sales, which are part of our asset management strategy,
Interest expense and distributions
resulted in pre-tax gains of $3.3 million in 2002 compared with pre-tax of preferred securities (55.8) (53.4) 4%
gains of approximately $17 million in 2001. In addition, earnings on Other income (expense) $ (8.0) $(15.9) 50%
equity investments were higher in 2002 compared with 2001 primarily
due to our investment in American Transmission Company. MISCELLANEOUS INCOME
Miscellaneous income increased $10.3 million, or 27%, in 2002 compared
O P E R AT I N G E X P E N S E S to 2001. WPS Power Development’s miscellaneous income increased
$25.1 million in 2002 primarily as the result of recognizing a pre-tax
WPS Resources’ gain of $38.0 million related to the 2001 sale of part of WPS Power
Operating Expenses Development’s synthetic fuel operations. WPS Power Development
(Millions) 2002 2001 Change recognized a pre-tax gain of $2.2 million on the sale in the fourth quarter
Operating and maintenance of 2001 and deferred the remaining portion of the gain pending
expense $412.5 $333.0 24% satisfaction of certain contingencies, including the receipt of a private
Depreciation and decommissioning
letter ruling from the Internal Revenue Service. The contingencies were
expense 94.8 84.1 13%
satisfied in 2002 and the remaining gain was recognized. WPS Power
Taxes other than income 39.9 36.7 9%
Development also recognized royalties of $2.3 million in 2002 related to
26 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
its synthetic fuel operations. Partially offsetting these factors were equity $31.0 million, or 23%, at December 31, 2003, compared to December 31,
method losses for WPS Power Development’s synthetic fuel operations. 2002, and long-term liabilities from risk management activities decreased
$17.5 million, or 16%. These variances were largely due to changes in
Utility miscellaneous income decreased $8.1 million in 2002 primarily as
the forward price curve for natural gas and increased volumes.
the result of lower earnings of $5.7 million on Wisconsin Public Service’s
nuclear decommissioning trust assets. Due to regulatory practice, a Property, plant, and equipment, net, increased $116.4 million to
decrease in earnings on the trust assets is largely offset by decreased $1,828.7 million at December 31, 2003, compared to $1,712.3 million
depreciation expense. at December 31, 2002. WPS Resources adopted Statement No. 143,
“Accounting for Asset Retirement Obligations,” effective January 2003,
Miscellaneous income related to Holding Company and Other operations
and as a result, capitalized a net asset retirement cost of $90.8 million
also decreased in 2002 compared to 2001. The decrease is largely due to
(decreased to $78.5 million at December 31, 2003, due to depreciation).
a $13.7 million decrease in gains realized from the sale of hydroelectric
The remaining increase in property, plant, and equipment, net, primarily
lands in 2002, partially offset by increased earnings on equity investments
relates to capital expenditures at Wisconsin Public Service for the Pulliam
due to the investment in American Transmission Company.
combustion turbine and gas and electric distribution equipment. The
INTEREST EXPENSE AND DISTRIBUTIONS OF PREFERRED SECURITIES staff of the Securities and Exchange Commission recently expressed
Interest expense increased $2.4 million, or 4%, in 2002 compared to 2001 their views on the balance sheet classification of costs of removal for
primarily due to the increase in the amount of long-term debt. the utility industry and required that the amounts be reclassified from
accumulated depreciation to a liability. As a result, WPS Resources
P R O V I S I O N F O R I N C O M E TA X E S reclassified costs of removal out of accumulated depreciation at
The effective tax rate was 19.5% in 2002 compared to 9.5% in 2001. December 31, 2003, and 2002. See Trends for more information about
The increase in the effective tax rate in 2002 compared to 2001 is largely these accounting changes.
due to a decrease in tax credits recognized from our ownership interest
Other long-term assets increased $83.5 million, or 31%, at December 31,
in a synthetic fuel operation. We used tax credits to the extent the tax
2003, compared to December 31, 2002, as a result of our investment in
law permits to reduce our current federal income tax liability, with any
Guardian Pipeline, additional investments in American Transmission
remaining credits increasing our alternative minimum tax credit available
Company, and the recognition of an intangible pension asset related to
for future years.
the minimum pension liability we recorded at December 31, 2003.
D I S C O N T I N U E D O P E R AT I O N S Accounts payable increased $58.7 million at December 31, 2003, compared
The after-tax loss from discontinued operations decreased to $6.0 million to December 31, 2002. The accounts payable balance at WPS Energy
in 2002 from $6.9 million in 2001. While we were able to improve the Services increased approximately $110 million as a result of an increase in
operating performance of our discontinued generation plant, market electric and natural gas purchases required to supply its larger customer
conditions for capacity in the area in which this plant participates base and the significant increase in natural gas prices compared to the
continued to degrade, which resulted in continued losses. prior year. The increase experienced by WPS Energy Services was
partially offset by a decrease in accounts payable at Wisconsin Public
Service, largely due to a $48.4 million payable that was recorded at
Balance Sheet December 31, 2002, resulting from the purchase of the De Pere Energy
Center. This amount was paid in 2003.
2003 Compared with 2002
Other current liabilities increased $33.8 million, or 64%, in 2003
Accounts receivable, net of reserves, increased $209.1 million, or 71%,
largely due to an increase in customer prepayments experienced
at December 31, 2003, compared to December 31, 2002, largely due to
at WPS Energy Services.
a $199 million increase in WPS Energy Services’ accounts receivable.
The increase in receivables at WPS Energy Services is due to a significant Regulatory liabilities increased $254.7 million at December 31, 2003,
increase in electric and natural gas sales volumes combined with compared to December 31, 2002, largely due to the reclassification
significantly higher natural gas prices. of $180.0 million of non-legal costs of removal from nuclear
decommissioning and other cost of removal to regulatory liabilities.
Inventories increased $68.0 million, or 62%, at December 31, 2003,
Most of the remaining increase relates to a regulatory liability that
compared to December 31, 2002. Inventories at Wisconsin Public Service
was recorded upon the adoption of Statement No. 143. See Trends
increased approximately $18 million, or 39%, in correlation with the
for more information about this accounting change.
39% increase in the average price of natural gas experienced by this
business in 2003. WPS Energy Services’ stored gas inventories increased Pension and postretirement benefit obligations increased $67.1 million,
approximately $50 million, or 82%, due to higher anticipated sales in or 95%, at December 31, 2003, compared to December 31, 2002, due
the first quarter of 2004 compared to the first quarter of 2003 and primarily to the minimum pension liability that was recorded at
increased natural gas prices. December 31, 2003, for our administrative pension plan, driven by a
decrease in the discount rate used to value our obligation under this plan.
Current assets from risk management activities increased $111.5 million,
or 27%, at December 31, 2003, compared to December 31, 2002, and The $344.0 million asset retirement obligation recorded at December 31,
current liabilities from risk management activities increased $73.5 million, 2003, is related to a legal retirement obligation recorded as a result of our
or 17%. Long-term assets from risk management activities decreased adoption of Statement No. 143 for the decommissioning of the irradiated
W PS R E S O U R C E S CO R P O R ATI O N 27

Management’s Discussion and Analysis
portions of the Kewaunee nuclear power plant. See Trends for more I NVESTI NG CASH FLOWS
information about this accounting change. Net cash used for investing activities was $244.0 million in 2003 compared
to $265.4 million in 2002, a decrease of $21.4 million. The decrease is
The $463.3 million liability for nuclear decommissioning and other costs
largely attributed to a $34.1 million decrease in capital expenditures, mainly
of removal at December 31, 2002, was reclassified from accumulated
at the utilities, as well as a $24.3 million increase in cash received from the
depreciation in accordance with recent views expressed by the staff
sale of property, plant, and equipment. Partially offsetting this decrease was
of the Securities and Exchange Commission for the utility industry.
an increase in cash used for the purchase of equity investments and other
Historically, these costs of removal were reflected as a component of
acquisitions. See Asset Sales and Acquisitions below for further detail.
depreciation expense and accumulated depreciation in accordance with
regulatory treatment. Upon adoption of Statement No. 143 on January 1, Cash used for investing activities was $265.4 million in 2002 compared
2003, costs of removal with associated legal obligations of $290.5 million to $134.8 million in 2001, an increase of $130.6 million. These factors
were removed from nuclear decommissioning and other costs of removal were partially the result of cash used for the purchase of equity
as these costs are now accounted for as asset retirement obligations. At investments and other acquisitions (discussed in more detail in Asset Sales
December 31, 2003, costs of removal without an associated legal obligation, and Acquisitions below), a decrease in the sale of property, plant, and
as defined by Statement No. 143, were reclassified to a regulatory equipment, and a decrease in return of capital from the American
liability pursuant to Statement No. 71. See Trends for more information Transmission Company. The increase was partially offset by a decrease
about this accounting change. in capital expenditures. The decrease in return of capital is due to the
fact that in 2001 WPS Resources transferred transmission assets at their
net book value to American Transmission Company in exchange for cash
Liquidity and Capital Resources and an approximate 15% ownership interest in American Transmission
Company. The decrease in the sale of property, plant, and equipment
We believe that our cash balances, liquid assets, operating cash flows,
from 2002 to 2001 was due to the 2001 sale of land on the Peshtigo
access to equity capital markets and borrowing capacity made available
River in northeastern Wisconsin to the Wisconsin Department of
because of strong credit ratings, when taken together, provide adequate
Natural Resources, as well as WPS Power Development’s transactions
resources to fund ongoing operating requirements and future capital
surrounding its synthetic fuel facility.
expenditures related to expansion of existing businesses and development
of new projects. However, our operating cash flow and access to capital ASSET SALES AND ACQUISITIONS
markets can be impacted by macroeconomic factors outside of our Certain acquisitions and asset sales that have a significant impact on
control. In addition, our borrowing costs can be impacted by short investing cash flows are discussed below. In addition, see Note 6 in
and long-term debt ratings assigned by independent rating agencies. Notes to WPS Resources Consolidated Financial Statements, Acquisitions
Currently, we believe these ratings are among the best in the energy and Sales of Assets, for a more detailed discussion of asset sales
industry (see Financing Cash Flows, Credit Ratings on page 31). and acquisitions.
O P E R AT I N G C A S H F L O W S On December 30, 2003, Wisconsin Public Service sold an additional
During 2003, net cash provided by operating activities was $62.4 million, 542 acres of land near the Peshtigo River to the Wisconsin Department
compared with $188.5 million in 2002. The decrease is primarily due to of Natural Resources for $6.5 million as part of a multi-phase agreement
increased working capital requirements, specifically at WPS Energy reached between the parties in 2001. Under the terms of the 2001
Services and Wisconsin Public Service. Inventories increased due to high agreement, the Wisconsin Department of Natural Resources bought
natural gas prices at both WPS Energy Services and Wisconsin Public more than 5,000 acres of land for $13.5 million in 2001. The sale is
Service, as well as business growth at WPS Energy Services. The part of a five to seven-year asset management strategy adopted by
inventory increase is also the result of WPS Energy Services’ taking WPS Resources in 2001.
advantage of opportunities to put additional gas into storage at favorable
On April 18, 2003, the Public Service Commission of Wisconsin
relationships to forward prices. The change in receivables and payables
approved Wisconsin Public Service’s request to transfer its interest in
was also attributable to the high natural gas prices as well as the business
the Wausau, Wisconsin, to Duluth, Minnesota, transmission line to the
growth at WPS Energy Services.
American Transmission Company. American Transmission Company
During 2002, net cash provided by operating activities was $188.5 million, is a for-profit transmission-only company created by the transfer of
compared with $144.1 million in 2001. The increase is primarily due to an transmission assets previously owned by multiple electric utilities serving
increase in income available for common shareholders after adjustment the upper Midwest in exchange for an ownership interest in American
for certain non-cash items, partially offset by an increase in cash used for Transmission Company. Wisconsin Public Service sold approximately
working capital items. The increase in accounts receivable was the result $20.1 million of assets at book value related to the Wausau to Duluth
of increased sales volumes at Wisconsin Public Service and WPS Energy transmission line to American Transmission Company in June 2003. No
Services due to colder weather and customer growth. Increased natural gain or loss was recognized on the transaction. Wisconsin Public Service
gas purchases at Wisconsin Public Service and WPS Energy Services as will continue to manage construction of the project and be responsible
the result of colder weather and customer growth contributed to the for obtaining property rights necessary for the construction of the project.
higher accounts payable balance.
During 2003, WPS Resources invested an additional $19.9 million in
American Transmission Company, increasing the consolidated
28 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
WPS Resources ownership interest in American Transmission Company CAPITAL EXPENDITURES
to 19.8%. WPS Resources contributed capital of $14.0 million to Capital expenditures by business segment for the years ended
ECO Coal Pelletization #12 in 2003 and $11.7 million in 2002. December 31, 2003, 2002, and 2001 are as follows:
On May 30, 2003, WPS Resources purchased a one-third interest in Years Ended December 31,
Guardian Pipeline, LLC from CMS Gas Transmission Company, for
approximately $26 million. Guardian Pipeline owns a natural gas pipeline, 2003 2002 2001
which began operating in 2002, that stretches about 140 miles from near Electric Utility $131.0 $164.3 $175.8
Joliet, Illinois, into southern Wisconsin. Gas Utility 40.7 34.0 24.9
WPS Energy Services 1.4 0.8 10.9
On December 16, 2002, Wisconsin Public Service purchased the WPS Power Development 3.3 8.2 27.7
180-megawatt De Pere Energy Center for $120.4 million and terminated Other (0.2) 3.0 5.0
the related existing purchased power agreement. Wisconsin Public Service WPS Resources Consolidated $176.2 $210.3 $244.3
paid $72.0 million at the close of the transaction and the remaining
Capital expenditures in the electric utility were higher in 2002, as
$48.4 million in December 2003.
compared to 2003, mainly due to the construction of portions of the
Effective June 1, 2002, WPS Power Development acquired CH Resources, Pulliam combustion turbine at Wisconsin Public Service in 2002. Gas
Inc. from Central Hudson Energy Services, Inc. for $61.1 million, including utility capital expenditures increased due to the installation of automated
acquisition costs. CH Resources owns three power plants and associated meter reading in 2003. WPS Power Development’s capital expenditures
assets in upstate New York with a combined capacity of 258 megawatts. were higher in 2002 compared to 2003 due to the conversion of the
Combined Locks Energy Center to a combined cycle system in 2002.
In November 2001, WPS Power Development, through its subsidiary
Capital expenditures at WPS Energy Services remained fairly consistent
ECO Coal Pelletization #12, LLC, entered into a transaction to acquire
between 2003 and 2002.
the remaining interest in the synthetic fuel producing facility (partially
owned by ECO #12) from its partner. Concurrently, with this transaction, As part of its regulated utility operations, on September 26, 2003,
WPS Power Development entered into a separate transaction with a Wisconsin Public Service submitted an application for a Certificate of
subsidiary of a public company resulting in ECO #12 contributing 100% Public Convenience and Necessity to the Public Service Commission
of its synthetic fuel producing machinery to a newly formed entity in of Wisconsin seeking approval to build a 500-megawatt coal-fired
exchange for cash and a one-third ownership interest in the newly generation facility near Wausau, Wisconsin. The facility is estimated to
formed entity. These transactions generated a pre-tax gain of $40.2 million, cost approximately $770 million (including the acquisition of coal trains),
of which $38.0 million had been deferred as of December 31, 2001, as a assuming the Public Service Commission of Wisconsin allows a current
result of certain rights of rescission and put options being granted to the return on construction costs. As of December 31, 2003, Wisconsin Public
buyer. WPS Power Development recognized all of the $38.0 million Service has incurred a total cost of $4.0 million related to this project.
deferred gain in 2002. In its 2003 rate order, the Public Service Commission of Wisconsin
authorized deferral of costs related to development of the facility. On
The actual payments for the purchase of the former partner’s interest in
November 12, 2003, Wisconsin Public Service received a declaratory
ECO #12 were contingent upon the same provisions referred to above.
ruling allowing recovery of all reasonable costs (up to $71.2 million)
As a result, $21.3 million was originally held in escrow and released
related to the project incurred or committed to prior to the Public
proportionately as the respective rescission rights and put options expired.
Service Commission of Wisconsin’s final decision regarding construction
As of December 31, 2003, the escrow balance has been released as all
authorization. In addition, Wisconsin Public Service expects to incur
contingencies have expired.
additional construction costs of approximately $41 million to fund
On December 19, 2002, WPS Power Development sold a 30% interest construction of the transmission facilities required to support the
in ECO #12. WPS Power Development received consideration of generating facility through the date the generating facility goes into
$3.0 million cash, as well as a fixed note and a variable note. Payments service. American Transmission Company will reimburse Wisconsin
under the variable note are contingent upon the synthetic fuel facility Public Service for the construction costs of the interconnection and
achieving specified levels of synthetic fuel production. In conjunction related carrying costs when the generation facility becomes
with the sale, WPS Power Development agreed to make certain payments commercially operational.
to a third party broker, consisting of an up-front payment of $1.5 million
On February 11, 2004, the Public Service Commission of Wisconsin
(which was paid at the time of closing), $1.9 million which was paid in
determined Wisconsin Public Service’s application is “complete.” The
2003, and an additional $1.9 million to be paid in 2004. A deferred gain of
Public Service Commission of Wisconsin and the Wisconsin Department
$9.2 million and $11.6 million was reflected on WPS Power Development’s
of Natural Resources now have 180 days to make a decision on the
balance sheet at December 31, 2003, and 2002, respectively. In 2003, a
project. The Public Service Commission of Wisconsin may request from
pre-tax gain in the amount of $7.6 million was recognized as a component
the Dane County Court of Appeals one 180-day extension. The Public
of miscellaneous income related to this transaction, of which $2.4 million
Service Commission of Wisconsin and the Wisconsin Department of
related to the recognition of a portion of the deferred gain referenced
Natural Resources will create an environmental impact statement. The
above. Similar annual gains are expected to result from this transaction
public will have opportunities to testify at public hearings. Technical
through 2007. There was no gain recognized in 2002 related to
hearings will also be held. Following a review of the application, the
this transaction.
environmental impact statement, and the hearing testimony, the
W PS R E S O U R C E S CO R P O R ATI O N 29

Management’s Discussion and Analysis
Public Service Commission of Wisconsin will determine if the proposed during the third quarter of 2003. The 2002 credit line syndications were
project will be approved, modified, or denied. $180.0 million for WPS Resources and $100.0 million for Wisconsin
Public Service. The credit lines are used to back 100% of WPS Resources’
On February 16, 2004, Wisconsin Public Service signed a Letter of Intent
and Wisconsin Public Service’s commercial paper borrowing programs
with Dairyland Power Cooperative for electric supply alternatives for
and letters of credit for WPS Resources.
150 megawatts of energy from the proposed 500-megawatt coal-fired
generation facility. According to the agreement, Dairyland could choose WPS Resources had outstanding commercial paper borrowings of
to purchase an interest in the plant or buy electricity from it (we have $28.0 million and $16.0 million at December 31, 2003, and 2002, respectively.
since received written notification from Dairyland, confirming their WPS Resources had outstanding short-term debt of $10.0 million and
intent to purchase an interest in the plant). In providing Dairyland with $13.8 million as of December 31, 2003, and 2002, respectively.
electric supply alternatives, Wisconsin Public Service can reduce the
In 2003, WPS Resources’ shelf registration statement for $350.0 million
risks associated with building and operating the power plant. The
was declared effective by the Securities and Exchange Commission,
agreement is part of Wisconsin Public Service’s continuing plan to
which allows WPS Resources to issue any combination of debt and
provide least-cost reliable energy for the increasing electric demand
equity. In November 2003, 4,025,000 shares of WPS Resources common
of its customers. This transaction is subject to a number of conditions
stock were sold in a public offering at $43.00 per share, which resulted in
including successfully developing a joint plant ownership and operating
a net increase in equity of $166.8 million. Net proceeds from this offering
agreement, Dairyland obtaining financing approval from the Rural Utility
were used to retire $50.0 million of 7.0% trust preferred securities in
Services, and Dairyland securing firm transmission service from the
January 2004, reduce short-term debt, fund equity contributions to
Midwest Independent System Operator on terms and conditions
subsidiary companies, and for general corporate purposes.
Dairyland deems acceptable.
Wisconsin Public Service, under a registration statement declared
Capital expenditures at the electric utility were $11.5 million higher in
effective in 2002, issued $125.0 million of 4.80% 10-year senior notes
2001, as compared to 2002, mostly related to steam generator replacement
in December 2003. The senior notes are collateralized by a pledge of
at the Kewaunee nuclear power plant that occurred in 2001. In the gas
first mortgage bonds and may become non-collateralized if Wisconsin
utility segment, capital expenditures increased by $9.1 million in 2002,
Public Service retires all of its outstanding first mortgage bonds. The
partially due to the installation of automated meter reading. The remaining
net proceeds from the issuance of the senior notes were used to call
increase is attributed to various one-time projects that occurred in 2002.
$49.9 million of 7.125% first mortgage bonds on January 19, 2004,
Capital expenditures at WPS Energy Services were $10.1 million higher in
fund construction costs and capital additions, reduce short-term
2001 compared to 2002 due to the construction of a gas storage field in
indebtedness, and for other corporate utility purposes.
2001. WPS Power Development’s capital expenditures were $19.5 million
higher in 2001 compared to 2002 due to the completion of the Combined Effective January 2001, we began issuing new shares of common stock
Locks Energy Center construction in 2001. under our Stock Investment Plan and under certain stock-based employee
benefit plans. Equity increased $31.0 million, $28.3 million, and
FINANCING CASH FLOWS $18.6 million in 2003, 2002, and 2001, respectively, as a result of these
Net cash provided by financing activities was $198.6 million in 2003 plans. WPS Resources also repurchased $1.1 million, $1.3 million, and
compared to $93.1 million in 2002. The $105.5 million increase in cash $1.1 million of outstanding common stock for stock-based compensation
provided by financing activities in 2003 is primarily related to the decrease plans in 2003, 2002, and 2001, respectively.
in cash provided by operating activities in 2003 compared to 2002. A
larger amount of investing activities was financed through common Wisconsin Public Service used short-term debt to retire $50.0 million
stock and debt issuances in 2003 as compared to the prior year. of 6.8% first mortgage bonds on February 1, 2003, that had reached
maturity. Wisconsin Public Service also called $9.1 million of 6.125%
Our financing activities provided cash inflows of $93.1 million and tax-exempt bonds in May 2003. Wisconsin Public Service is evaluating
$33.6 million for the years ended December 31, 2002, and 2001, the potential for refinancing existing debt in 2004.
respectively. The 2002 increase was due to new debt issuances used
to finance investing activities, offset by an increase in repayments of In March 2003, Upper Peninsula Power retired $15.0 million of 7.94%
long-term debt and the capital lease (see Significant Financing Activities first mortgage bonds that had reached maturity.
below for further detail). The net change in short-term debt in 2002 In November 2003, WPS Power Development retired all of the notes
from 2001 is attributable to the reduced need to rely on commercial payable under a revolving credit note, in the amount of $12.5 million.
paper in 2001 due to the 2001 issuance of additional long-term debt
at Wisconsin Public Service and common stock at WPS Resources. In October 2002, Wisconsin Public Service retired $50.0 million of 7.30%
first mortgage bonds that had reached maturity.
SIGNIFICANT FINANCING ACTIVITIES
WPS Resources issued $100 million of 5.375% 10-year senior non-
As of December 31, 2003, both WPS Resources and Wisconsin Public
collateralized notes in November 2002. We used approximately $55 million
Service were in compliance with all of the covenants under their lines
of the net proceeds from the issuance of these notes to repay short-term
of credit and other debt obligations.
debt incurred to provide equity capital to our subsidiaries and the
WPS Resources and Wisconsin Public Service established 364-day credit remainder for other corporate purposes.
line syndications for $225.0 million and $115.0 million, respectively,
30 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Wisconsin Public Service issued $150.0 million of 4.875% 10-year WPS Resources and Wisconsin Public Service hold credit lines to back
senior notes in December 2002. The senior notes are collateralized by 100% of their commercial paper borrowing and letters of credit. These
a pledge of first mortgage bonds and may become non-collateralized credit facilities are based on a credit rating of A-1/P-1 for WPS Resources
if Wisconsin Public Service retires all of its outstanding first mortgage and A-1+/P-1 for Wisconsin Public Service. A decrease in the commercial
bonds. Wisconsin Public Service used approximately $72 million of the paper credit ratings could adversely affect the companies by increasing
net proceeds from the issuance of the senior notes to acquire the De Pere the interest rates at which they can borrow and potentially limiting the
Energy Center and $69 million to retire short-term debt. The balance availability of funds to the companies through the commercial paper
of the net proceeds was used for other corporate utility purposes. market. A restriction in the companies’ ability to use commercial paper
borrowing to meet their working capital needs would require them to
CREDIT RATINGS secure funds through alternate sources resulting in higher interest expense,
WPS Resources uses internally generated funds and commercial paper higher credit line fees, and a potential delay in the availability of funds.
borrowing to satisfy most of its capital requirements. We also periodically
issue long-term debt and common stock to reduce short-term debt, WPS Energy Services maintains underlying agreements to support its
maintain desired capitalization ratios, and fund future growth. We electric and gas trading operations. In the event of a deterioration of
may seek nonrecourse financing for funding nonregulated acquisitions. WPS Resources’ credit rating, many of these agreements allow the
WPS Resources’ commercial paper borrowing program provides for counterparty to demand additional assurance of payment. This provision
working capital requirements of the nonregulated businesses and could pertain to existing business, new business or both with the
Upper Peninsula Power. Wisconsin Public Service has its own commercial counterparty. The additional assurance requirements could be met with
paper borrowing program. The specific forms of long-term financing, letters of credit, surety bonds or cash deposits and would likely result in
amounts, and timing depend on the availability of projects, market WPS Resources being required to maintain increased bank lines of credit
conditions, and other factors. or incur additional expenses, and could restrict the amount of business
WPS Energy Services can conduct.
The current credit ratings for WPS Resources and Wisconsin Public
Service are listed in the table below: WPS Energy Services uses the NYMEX and over-the-counter financial
markets to hedge its exposure to physical customer obligations. These
Credit Ratings Standard & Poor’s Moody’s hedges are closely correlated to the customer contracts, but price
WPS Resources Corporation movements on the hedge contracts may require financial backing.
Senior unsecured debt A A1 Certain movements in price for contracts through the NYMEX exchange
Commercial paper A-1 P-1 require posting of cash deposits equal to the market move. For the over-
Credit line syndication – A1 the-counter market, the underlying contract may allow the counterparty
Wisconsin Public Service Corporation to require additional collateral to cover the net financial differential
Bonds AA- Aa2
Preferred stock A A2 between the original contract price and the current forward market.
Commercial paper A-1+ P-1 Increased requirements related to market price changes usually only
Credit line syndication – Aa3 result in a temporary liquidity need that will unwind as the sales
contracts are fulfilled.
In November 2003, Moody’s downgraded its long-term ratings for
WPS Resources and Wisconsin Public Service one ratings level, leaving
only commercial paper ratings unchanged. Moody’s downgrade of
WPS Resources was based principally on a gradual shift in the company’s
financial and business risk profile attributable to the growth of nonregulated
businesses, the impact of weaker wholesale power markets, and a
relatively high dividend payout. Moody’s downgrade of Wisconsin Public
Service is based on the expectation that the utility’s substantial capital
spending program will exceed its retained cash flow through 2007, which
is likely to lead to a meaningful increase in debt. Following the downgrade,
Moody’s set the ratings outlook at stable for both WPS Resources and
Wisconsin Public Service. We believe these ratings continue to be among
the best in the energy industry, and allow us to access commercial paper
and long-term debt markets on favorable terms. Credit ratings are not
recommendations to buy, are subject to change, and each rating should
be evaluated independently of any other rating.
Rating agencies use a number of both quantitative and qualitative
measures in determining a company’s credit rating. These measures include Each month, Wisconsin
business risk, liquidity risk, competitive position, capital mix, financial Public Service processes
condition, predictability of cash flows, management strength, and future 350,000 customer payments.
direction. Some of the quantitative measures can be analyzed through a Nancy McAllister is the
few key financial ratios, while the qualitative ones are more subjective. Lead Payment Processor
in Green Bay, Wisconsin.
W PS R E S O U R C E S CO R P O R ATI O N 31

Management’s Discussion and Analysis
F U T U R E C A P I TA L R E Q U I R E M E N T S A N D R E S O U R C E S
CONTRACTUAL OBLIGATIONS
The following table summarizes the contractual obligations of
WPS Resources, including its subsidiaries.
Contractual Obligations Payments Due By Period
As of December 31, 2003 Total Amounts Less Than 1 to 3 3 to 5 Over 5
(Millions) Committed 1 Year Years Years Years
Long-term debt principal and interest payments $1,498.0 $ 112.9 $ 125.9 $126.8 $1,132.4
Operating leases 19.0 5.0 4.8 3.1 6.1
Commodity purchase obligations 3,052.7 2,016.7 718.4 243.9 73.7
Purchase orders 168.8 126.1 37.3 5.4 –
Capital contributions to equity method investment 206.5 47.3 96.4 62.8 –
Other 83.4 22.3 58.3 0.8 2.0
Total contractual cash obligations $5,028.4 $2,330.3 $1,041.1 $442.8 $1,214.2
Long-term debt principal and interest payments represent bonds issued, Wisconsin, to Duluth, Minnesota, transmission line to the American
notes issued, and loans made to WPS Resources and its subsidiaries. Transmission Company. WPS Resources committed to fund 50% of total
We record all principal obligations on the balance sheet. Commodity project costs incurred up to $198 million, and receive additional equity
purchase obligations represent mainly commodity purchase contracts in American Transmission Company. WPS Resources may terminate
of WPS Resources and its subsidiaries. The energy supply contracts at funding if the project extends beyond January 1, 2010. On December 19,
WPS Energy Services summarized above generally have offsetting energy 2003, Wisconsin Public Service and American Transmission Company
sale contracts. Wisconsin Public Service expects to recover the costs of received approval to continue the project with the new cost estimate
its contracts in future customer rates. Purchase orders include obligations of $420.3 million. The updated cost estimate reflects additional costs for the
related to normal business operations and large construction obligations. project resulting from time delays, added regulatory requirements, changes
Other mainly represents expected pension and postretirement funding and additions to the project at the request of local governments and American
obligations for the years of 2004 and 2005. Transmission Company’s management, and overhead costs. Completion
of the line is expected in 2008. WPS Resources has the right, but not the
CAPITAL REQUIREMENTS obligation, to provide additional funding in excess of $198 million up to its
Wisconsin Public Service makes large investments in capital assets. portion of the revised cost estimate. For the period 2004 through 2006, we
Net construction expenditures are expected to be approximately expect to make capital contributions of up to $128 million for our portion
$1,264 million in the aggregate for the 2004 through 2006 period (upon of the Wausau to Duluth transmission line. In exchange, we will receive
the closing of the sale of the Kewaunee nuclear power plant, expenditures increased ownership in the American Transmission Company.
would decrease approximately $44.9 million during this period). The
largest of these expenditures is for the construction of the 500-megawatt WPS Resources expects to provide additional capital contributions of
coal-fired generation facility near Wausau, Wisconsin, in which approximately $15 million to American Transmission Company in 2004
Wisconsin Public Service is expected to incur costs of $549 million for other projects.
between 2004 through 2006. In addition, Wisconsin Public Service Upper Peninsula Power is expected to incur construction expenditures
expects to incur additional construction costs of approximately $12 million of about $45 million in the aggregate for the period 2004 through 2006,
between 2004 and 2006 to fund construction of the transmission primarily for electric distribution improvements and repairs and safety
facilities required to support the generating facility. Other significant measures at hydroelectric facilities.
anticipated expenditures during this three-year period include:
Capital expenditures identified at WPS Power Development for 2004
• combustion turbines – $49 million through 2006 are expected to be approximately $5 million, including
• pollution control equipment – $23 million $2.5 million at the Sunbury facility, which will be reimbursed by
• corporate services infrastructures – $41 million Duquesne Light Holdings if the sale of Sunbury is consummated (see
Note 4 in Notes to WPS Resources Consolidated Financial Statements,
• automated meter reading – $35 million
Assets Held for Sale, for a more detailed discussion of the sale of the
• nuclear fuel – $33 million Sunbury facility).
• mercury control projects – $59 million
Capital expenditures identified at WPS Energy Services for 2004 through
Other capital requirements for the three-year period include a 2006 are expected to be approximately $2.7 million.
potential contribution of $3.3 million to the Kewaunee nuclear power
All projected capital and investment expenditures are subject to periodic
plant decommissioning trust fund (depending on the sale of the
review and revision and may vary significantly from the estimates
Kewaunee assets).
depending on a number of factors, including, but not limited to, industry
On April 18, 2003, the Public Service Commission of Wisconsin approved restructuring, regulatory constraints, acquisition opportunities, market
Wisconsin Public Service’s request to transfer its interest in the Wausau, volatility, and economic trends. Other capital expenditures for
32 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
WPS Resources and its subsidiaries for 2004 through 2006 could be On October 24, 2003, WPS Power Development entered into a definitive
significant depending on its success in pursuing development and agreement to sell its Sunbury generation plant to a subsidiary of
acquisition opportunities. When appropriate, WPS Resources may seek Duquesne Light Holdings for approximately $120 million, subject to
nonrecourse financing for a portion of the cost of these acquisitions. certain working capital adjustments and regulatory approval. See Note 4
in Notes to WPS Resources Consolidated Financial Statements, Assets
CAPITAL RESOURCES Held for Sale, for more information.
For the period 2004 through 2006, WPS Resources plans to use internally
generated funds net of forecasted dividend payments, cash proceeds from KEWAUNEE NUCLEAR POWER PLANT
pending asset sales, and debt and equity financings to fund capital On November 7, 2003, Wisconsin Public Service and Wisconsin Power
requirements. WPS Resources plans to maintain current debt to equity and Light Company entered into a definitive agreement to sell the
ratios. Management believes WPS Resources has adequate financial Kewaunee nuclear power plant to a subsidiary of Dominion Resources,
flexibility and resources to meet its future needs. Inc. Wisconsin Public Service is a 59% owner of the Kewaunee nuclear
power plant. The transaction is subject to approval from various
WPS Resources has the ability to issue up to an additional $176.9 million
regulatory agencies, including the Public Service Commission of
of debt or equity under its currently effective shelf registration statement.
Wisconsin, the Federal Energy Regulatory Commission, the Nuclear
Wisconsin Public Service has the ability to issue up to an additional
Regulatory Commission, and several other state utility regulatory
$25.0 million of debt under its currently effective shelf registration
agencies and is projected to close in 2004. Approval has already been
statement. Wisconsin Public Service intends to file a new shelf registration
obtained from the Iowa Public Utility Commission.
statement in 2004 for an additional $350 million.
Wisconsin Public Service estimates that its share of the cash proceeds
WPS Resources and Wisconsin Public Service have 364-day credit line
from the sale will approximate $130 million, subject to various post-
syndications for $225.0 million and $115.0 million, respectively. The credit
closing adjustments. The cash proceeds from the sale are expected to
lines are used to back 100% of WPS Resources’ and Wisconsin Public
slightly exceed the carrying value of the Wisconsin Public Service assets
Service’s commercial paper borrowing programs and letters of credit for
being sold. In addition to the cash proceeds, Wisconsin Public Service
WPS Resources. As of December 31, 2003, there was a total of $260.9 million
will retain ownership of the assets contained in its non-qualified
available under the lines of credit, net of $28 million of outstanding
decommissioning trust, one of two funds that were established to cover
commercial paper, and $50.7 million in cash and cash equivalents.
the eventual decommissioning of the Kewaunee nuclear power plant.
In 2003, WPS Resources announced the sale of WPS Power Development’s The pre-tax fair value of the non-qualified decommissioning trust’s assets
Sunbury generation plant and Wisconsin Public Service announced the at December 31, 2003, was $115.1 million. Dominion will assume
sale of its portion of the Kewaunee nuclear power plant. Both of these responsibility for the eventual decommissioning of Kewaunee and will
sales are expected to close in 2004. A portion of the proceeds related to receive Wisconsin Public Service’s qualified decommissioning trust assets
the Sunbury sale may be used to pay the non-recourse debt related to that had a fair value of $239.7 million at December 31, 2003. Wisconsin
the plant. A portion of the proceeds related to the Kewaunee sale will Public Service will request deferral of the gain expected to result from
be used to retire debt at Wisconsin Public Service. The remainder of the this transaction and related costs from the Public Service Commission of
proceeds from both the Sunbury and Kewaunee sales will be used by Wisconsin. Accordingly, the gain on the sale of the plant assets and the
WPS Resources for investing activities and general corporate purposes related non-qualified decommissioning trust assets is expected to be
of its subsidiaries, including reducing the amount of outstanding debt. returned to customers under future rate orders.
For more information regarding the Sunbury and Kewaunee sale,
see the discussion below. REGULATORY
Wisconsin
O T H E R F U T U R E C O N S I D E R AT I O N S Effective March 21, 2003, Wisconsin Public Service received approval to
SUNBURY GENERATION PLANT increase Wisconsin retail electric rates $21.4 million (3.5%) and decrease
As a result of both market conditions and issues related to the physical Wisconsin retail natural gas rates $1.2 million (0.3%). The 2003 electric
performance of the plant, the Sunbury generation plant has not met and retail natural gas rates reflect a 12.0% return on equity and allowed
our projected near-term financial performance levels. Market conditions average equity of 55% in the utility’s capital structure.
continue to be depressed due to low prices for capacity. Sunbury also On April 1, 2003, Wisconsin Public Service filed an application with the
incurred significant outage time during 2003 to maintain and repair fuel Public Service Commission of Wisconsin for authorization to increase
handling and recently installed environmental control equipment that retail electric rates and retail natural gas rates, effective January 1, 2004.
experienced accelerated wear from the use of low grade fuel in some of The rate increases are necessary to recover the costs associated with the
the units. Operational issues related to Sunbury have been resolved or a purchase of the De Pere Energy Center, fuel costs, maintenance of power
plan has been put in place to resolve them. WPS Resources made capital production facilities, and employee benefits. On December 19, 2003, the
contributions of $18.5 million to Sunbury in 2003 to compensate for Public Service Commission of Wisconsin issued a final written order
the impact of decreased capacity revenues, as well as adjustments to authorizing a retail electric rate increase of $59.4 million (9.4%) and a
Sunbury’s operating plan. For 2004, WPS Resources’ Board of Directors retail natural gas rate increase of $8.9 million (2.2%), effective January 1,
has granted authorization to contribute up to $24.5 million of capital 2004. The 2004 rates reflect a 12.0% return on equity. The Public Service
to Sunbury. These funds will be used to cover operating losses, make Commission of Wisconsin also approved average equity of 56% in the
principal and interest payments, and purchase emission allowances. utility’s capital structure.
W PS R E S O U R C E S CO R P O R ATI O N 33

Management’s Discussion and Analysis
The amount of fuel and purchased power costs Wisconsin Public Service Michigan authorizes a one-for-one fuel and purchased power recovery
is authorized to recover in rates is established in its general rate filings. mechanism for prudently incurred costs. Under the mechanism, the
If the actual fuel and purchased power costs vary from the authorized difference between actual and authorized fuel and purchased power costs
level by more than 2% on an annual basis, Wisconsin Public Service is deferred until year-end. By March 31 of the following year, the utility
is allowed, or may be required, to file an application adjusting rates must file a reconciliation of the actual costs to the authorized costs. Any
for the remainder of the year to reflect actual costs for the year to date under or over recovery is then recovered from rates or returned to the
and updated projected costs. On October 29, 2003, Wisconsin Public ratepayer through the end of the following year. The reconciliation is subject
Service filed to reduce rates by $1.9 million, due to a reduction in the to review and intervention by customers. At December 31, 2003, Upper
costs of fuel and purchased power, for the period August 15, 2003, Peninsula Power had significantly under recovered fuel and purchased
through December 31, 2003. On February 19, 2004, the Public Service power costs due to the high costs of purchased power. Upper Peninsula
Commission of Wisconsin approved a refund of $2.7 million, which Power intends to file, in March 2004, a reconciliation of the 2003 purchased
represents the originally filed amounts, adjustments, and interest. power costs requesting recovery of $5.2 million. In addition, costs
This refund is expected to be credited to customer accounts in March associated with the Presque Isle Power Plant outage have been deferred
2004. A liability of $2.6 million was accrued as of December 31, 2003, and are expected to be addressed along with other Dead River flood
in anticipation of this refund. issues in the next rate case. Upper Peninsula Power expects a final decision
regarding the recovery of the 2003 fuel costs no later than the end of 2004.
As a result of the Kewaunee nuclear power plant unplanned outage in
Due to the level of the under recovery relative to Upper Peninsula Power’s
late January and early February 2004 and other fuel cost increases in 2004,
revenues, the deferred cost may be recovered over more than one year.
Wisconsin Public Service filed for a fuel cost increase of $7.4 million on
February 27, 2004. The Public Service Commission of Wisconsin has Federal
scheduled a hearing for March 22, 2004, to determine the amount of On April 30, 2003, Wisconsin Public Service received a draft order from the
the fuel cost increase to be recovered on an interim basis. Wisconsin Federal Energy Regulatory Commission approving a 21%, or $4.1 million,
Public Service expects that a final order will be issued in summer 2004 interim increase in wholesale electric rates. The new wholesale rates were
regarding this rate increase request. effective on May 11, 2003, and are subject to refund if the final rate increase
is less. The draft order also granted the use of formula rates, which allow for
Michigan
the adjustment of wholesale electric rates to reflect actual costs without
Wisconsin Public Service filed for an increase in electric rates in the first
having to file additional rate requests. On March 4, 2004, the Federal
quarter of 2003. On July 21, 2003, the Michigan Public Service Commission
Energy Regulatory Commission and Wisconsin Public Service reached a
authorized an increase in electric rates of $0.3 million and the recovery
tentative settlement regarding the final rate increase. Wisconsin Public Service
of an additional $1.0 million of transmission costs through the power
anticipates no material refunds or other adjustments to revenues recorded
supply cost recovery mechanism, effective July 22, 2003.
under the interim rates based on the terms of the tentative agreement. The
On December 20, 2002, the Michigan Public Service Commission approved final settlement is anticipated to be filed with the Federal Energy Regulatory
an 8.95% increase in retail electric rates for customers of Upper Peninsula Commission in the second quarter of 2004. This is Wisconsin Public
Power. The Michigan Public Service Commission granted an 11.4% return Service’s first rate increase for its wholesale electric customers in 17 years.
on equity with the new rates being effective December 21, 2002. This
was the first base rate increase for Upper Peninsula Power in 10 years. ASSET MANAGEMENT STRATEGY
In 2001, WPS Resources initiated an asset management strategy, whereby
assets, or business units, no longer required for operations would be disposed
over the next five to seven years in a manner that allows recognition
of profits and provides capital for redeployment into new opportunities.
In conjunction with the execution of a part of this strategy, the company
has identified certain assets to be disposed of consisting primarily of
land and some buildings, the sale of which is expected to provide basic
earnings per share between $0.15 and $0.25, annually, through 2007.
Off Balance Sheet Arrangements
As part of normal business, WPS Resources and its subsidiaries enter into
various guarantees providing financial or performance assurance to third
Perry Van Den Heuvel, Street/Service Mechanic for Wisconsin
Public Service, installs a new automated gas meter—for easier
and more accurate meter reading—on this house in Wausau,
Wisconsin. Automated meter reading has many benefits for
customers, including fewer estimated bills, reductions in outage
times, and improvements in meter reading accuracy.
34 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
WPS Resources’ Outstanding Guarantees
(Millions) December 31, 2003 December 31, 2002
Guarantees of subsidiary debt $ 39.7 $ 38.8
Guarantees supporting commodity transactions of subsidiaries 874.4 584.3
Standby letters of credit 61.1 22.7
Surety bonds 1.1 6.4
Other guarantee 5.5 –
Total guarantees $981.8 $652.2
WPS Resources’ Outstanding Guarantees Total Amounts
(Millions) Committed at Less Than 1 to 3 4 to 5 Over 5
Commitments Expiring December 31, 2003 1 Year Years Years Years
Guarantees of subsidiary debt $ 39.7 $ 12.5 $ – $ – $27.2
Guarantees supporting commodity
transactions of subsidiaries 874.4 769.3 83.4 21.2 0.5
Standby letters of credit 61.1 53.4 7.7 – –
Surety bonds 1.1 1.1 – – –
Other guarantee 5.5 – – – 5.5
Total guarantees $981.8 $836.3 $91.1 $21.2 $33.2
parties on behalf of certain subsidiaries. These guarantees are entered At December 31, 2003, WPS Resources had issued $34.1 million in
into primarily to support or enhance the creditworthiness otherwise corporate guarantees to support the business operation of WPS Power
attributed to a subsidiary on a stand-alone basis, thereby facilitating the Development, which are reflected in the above table. WPS Resources
extension of sufficient credit to accomplish the subsidiaries’ intended issues the guarantees for indemnification obligations related to business
commercial purposes. purchase agreements and counterparties in the wholesale electric
marketplace to meet their credit requirements and permit WPS Power
The guarantees issued by WPS Resources include intercompany guarantees
Development to operate within these markets. The amount supported is
between parents and their subsidiaries, which are eliminated in consolidation,
dependent on the amount of the outstanding obligation that WPS Power
and guarantees of the subsidiaries’ own performance. As such, these
Development has with the parties holding the guarantees at any point in
guarantees are excluded from the recognition, measurement, and disclosure
time. WPS Resources reflects WPS Power Development’s obligations
requirements of Financial Accounting Standards Board Interpretation
supported by these parental guarantees on its consolidated balance
No. 45, “Guarantors’ Accounting and Disclosure Requirements for
sheet as either accounts payable or other liabilities. In February 2004,
Guarantees, including Indirect Guarantees of Indebtedness of Others.”
WPS Resources’ Board of Directors authorized management to issue
At December 31, 2003, and December 31, 2002, outstanding guarantees corporate guarantees in the aggregate amount of up to $30.0 million
totaled $981.8 million and $652.2 million, respectively, as indicated in to support business operations at WPS Power Development in addition
the table at the top of this page. to guarantees that have received specific authorizations.
At December 31, 2003, WPS Resources had outstanding $39.7 million in Another $0.1 million of corporate guarantees support energy supply
corporate guarantees supporting indebtedness. Of that total, $39.5 million at Upper Peninsula Power and are not reflected on WPS Resources’
supports outstanding debt at two of WPS Power Development’s subsidiaries. consolidated balance sheet. In February 2004, WPS Resources’ Board of
The underlying debt related to these guarantees is reflected on the Directors authorized management to issue corporate guarantees in the
consolidated balance sheet. aggregate amount of up to $15 million to support the business operations
of Upper Peninsula Power. Corporate guarantees issued in the future under
WPS Resources’ Board of Directors has authorized management to issue
the Board authorized limit may or may not be reflected on WPS Resources’
corporate guarantees in the aggregate amount of up to $1.2 billion to
consolidated balance sheet, depending on the nature of the guarantee.
support the business operations of WPS Energy Services. WPS Resources
primarily issues the guarantees to counterparties in the wholesale electric At WPS Resources’ request, financial institutions have issued $61.1 million
and natural gas marketplace to provide counterparties the assurance in standby letters of credit for the benefit of third parties that have extended
that WPS Energy Services will perform on its obligations and permit credit to certain subsidiaries. If a subsidiary does not pay amounts when
WPS Energy Services to operate within these markets. The amount due under a covered contract, the counterparty may present its claim for
of guarantees actually issued by WPS Resources to support the business payment to the financial institution, which will request payment from
operations at WPS Energy Services at December 31, 2003, was $840.2 million WPS Resources. Any amounts owed by our subsidiaries are reflected in
and this is reflected in the table above. The amount actually supported is the consolidated balance sheet.
dependent on the amount of outstanding business WPS Energy Services
At December 31, 2003, WPS Resources furnished $1.1 million of surety
has with the counterparties holding the guarantees at any point in time.
bonds for various reasons including worker compensation coverage and
WPS Resources reflects WPS Energy Services’ obligations supported by
obtaining various licenses, permits, and rights-of-way. Liabilities incurred
these parental guarantees on its consolidated balance sheet either as
as a result of activities covered by surety bonds are included in the
accounts payable or liabilities from risk management activities.
consolidated balance sheet.
W PS R E S O U R C E S CO R P O R ATI O N 35

Management’s Discussion and Analysis
Other guarantee of $5.5 million listed on the above table was issued by pricing is the settled forward price curve of the NYMEX exchange, which
Wisconsin Public Service to indemnify a third party for exposures related includes contracts and options. Basis pricing is derived from published
to the construction of utility assets. This amount is not reflected on the indices and documented broker quotes. WPS Energy Services bases
consolidated balance sheet. electric prices on published indices and documented broker quotes.
The following table provides an assessment of the factors impacting
WPS Resources has not identified any material variable interest entities
the change in the net value of WPS Energy Services’ assets and
created, or interests in variable entities obtained, after January 31, 2003,
liabilities from risk management activities during the 12 months
that require consolidation or disclosure under the Financial Accounting
ended December 31, 2003.
Standard Board’s revised Interpretation No. 46 (“46R”), and we continue
to assess the existence of any interests in variable interest entities, not WPS Energy Services, Inc.
classified as special purpose entities, created on or prior to January 31, 2003. Mark-to-Market
The application of Interpretation No. 46R was required for interests in Roll Forward (Millions) Natural Gas Electric Total
special-purpose entities for periods ending after December 15, 2003. Fair value of contracts
WPSR Capital Trust I was deconsolidated from the Consolidated at January 1, 2003 $(7.1) $11.0 $ 3.9
Financial Statements of WPS Resources at December 31, 2003, as Less – contracts realized or
required by the provisions of Interpretation No. 46R related to special settled during period (15.0) (2.1) (17.1)
Plus – fair value of new contracts
purpose entities. As a result of the deconsolidation, WPS Resources
entered into during period 9.3 1.6 10.9
recorded a $1.5 million investment in the Trust within other current Other changes in fair value 16.4 _ 16.4
assets and a $51.5 million note payable to preferred stock trust, Cumulative effect of rescission
respectively, within the Consolidated Balance Sheet. Refer to Note 15 of Issue No. 98-10 9.7 (4.2) 5.5
of WPS Resources’ Notes to the Consolidated Financial Statements for Fair value of contracts
further information about the deconsolidation of WPSR Capital Trust I. at December 31, 2003 $13.3 $ 6.3 $19.6
WPS Resources currently anticipates that we will disclose information
The fair value of contracts at January 1, 2003, and December 31, 2003,
about a variable interest entity upon implementation of Interpretation
reflect the values reported on the balance sheet for net mark-to-market
No. 46R in the first quarter of 2004. Through an affiliate of WPS Power
current and long-term risk management assets and liabilities as of those
Development, WPS Resources owns a partial interest in a synthetic
dates. Contracts realized or settled during the period include the value
fuel production facility located in Kentucky and receives tax credits
of contracts in existence at January 1, 2003, that were no longer included
pursuant to Section 29 of the Internal Revenue Code based on sales to
in the net mark-to-market assets as of December 31, 2003, and the
unaffiliated third-party purchasers of synthetic fuel produced from coal.
amortization of those derivatives designated as normal purchases and
At December 31, 2003, WPS Resources had a 23% ownership interest in
sales under Statement No. 133. Mark-to-market gains and losses related
the synthetic fuel facility. Section 29 tax credits generated by the facility
to contracts that were entered into subsequent to January 1, 2003, that
are currently scheduled to expire at the end of 2007. WPS Resources’
are still included in WPS Energy Services’ portfolio at December 31, 2003,
maximum exposure to loss as a result of our involvement with this
are included in the fair value of new contracts entered into during the
potential variable interest entity is limited to our investment in the entity,
period. There were, in many cases, offsetting positions entered into and
which is not significant at December 31, 2003. Currently, we do not
settled during the period resulting in gains or losses being realized during
believe that WPS Resources is the primary beneficiary of this entity
the current period. The realized gains or losses from these offsetting
and do not anticipate consolidation of the synthetic fuel facility upon
positions are not reflected in the table above. The “Other changes in fair
adoption of Interpretation No. 46R in the first quarter of 2004.
value” line in the table primarily represents the reversal of the change in
the fair value of gas storage contracts as of January 1, 2003. With the
Trading Activities rescission of Issue No. 98-10, natural gas storage contracts are accounted
WPS Energy Services measures the fair value of contracts, including for on an accrual basis and are no longer adjusted to fair value. The
NYMEX exchange and over-the-counter contracts, natural gas options, cumulative effect of rescission of Issue No. 98-10 is the reversal of the
natural gas and electric power physical fixed price contracts, basis December 31, 2002, risk management assets and liabilities that no longer
contracts, and related financial instruments on a mark-to-market basis qualify for mark-to-market accounting with the rescission of Issue
using risk management systems. The primary input for natural gas No. 98-10 as required by Issue No. 02-03.
WPS Energy Services, Inc.
Derivative Contract Aging at Fair Value
As of December 31, 2003 Maturity Less Maturity Maturity Maturity in Total
Source of Fair Value (Millions) Than 1 Year 1 to 3 Years 4 to 5 Years Excess of 5 Years Fair Value
Prices actively quoted $ 6.0 $(0.1) $– $– $ 5.9
Prices provided by external sources 4.3 5.5 – – 9.8
Prices based on models and other valuation methods 1.2 2.7 – – 3.9
Total fair value $11.5 $ 8.1 $– $– $19.6
36 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
“Prices actively quoted” includes NYMEX contracts. “Prices provided by common shareholders prior to settlement of the hedge. In addition,
external sources” includes basis swaps and over-the-counter contracts. WPS Resources may apply the normal purchases and normal sales
“Prices based on models and other valuation methods” includes some retail exemption, provided by Statement No. 133, as amended, to certain
natural gas and electric contracts due to the volume optionality that exists contracts. The normal purchases and sales exception provides that no
in those contracts. We derive the pricing for all contracts in the table at recognition of the contract’s fair value in the consolidated financial
the bottom of page 36 from active quotes or external sources. Pricing statements is required until the settlement of the contract.
is the most significant variable in the mark-to-market calculations.
Derivatives contracts that are determined to fall within the scope of
WPS Energy Services, as a result of WPS Power Development’s acquisition Statement No. 133, as amended, are recorded at fair value on the
of generating assets in New York, has acquired transmission congestion Consolidated Balance Sheet of WPS Resources. Changes in fair value,
contracts, which are financial contracts, that hedge price risk between except those related to derivative instruments designated as cash flow
zones within the New York Independent System Operator. The contracts hedges, are generally included in the determination of income available for
were marked to fair value using a combination of modeled forward prices common shareholders at each financial reporting date until the contracts
and market quotes. The fair market value of the contracts at December 31, are ultimately settled. When available, quoted market prices are used to
2003, was $1.3 million. record a contract’s fair value. If no active trading market exists for a
commodity or for a contract’s duration, fair value is estimated through
Critical Accounting Policies the use of internally developed valuation techniques or models. Such
In May 2002, the Securities and Exchange Commission issued proposed estimates require significant judgment as to assumptions and valuation
rules regarding the identification and disclosure of accounting estimates a methodologies deemed appropriate by WPS Resources’ management. As
company makes in applying its accounting policies and the disclosure of a component of the fair value determination, WPS Resources maintains
initial adoption by a company of an accounting policy that has a material reserves to account for the estimated costs of servicing and holding certain
impact on its financial presentation. Under the first part of the proposal, of its contracts based upon administrative costs, credit/counterparty risk,
a company would have to identify the accounting estimates reflected in its and servicing margin with both fixed and variable components. The effect
financial statements that required it to make assumptions about matters of changing both the administrative costs and credit/counterparty risk
that were highly uncertain at the time of estimation. Disclosures about assumptions is as follows:
those estimates would then be required if different estimates that the
Change in Assumption Effect to Operating Reserve at
company reasonably could have used in the current period, or changes in
(Millions) December 31, 2003
the accounting estimate that are reasonably likely to occur from period to
100% increase $ 1.6
period, would have a material impact on the presentation of the company’s 50% decrease $(0.8)
financial condition, changes in financial condition or results of operations.
The Securities and Exchange Commission accepted comments on the These potential changes to the operating reserve would be shown as
proposed rules through July 19, 2002, and has not made any final part of the Nonregulated cost of fuel, gas and purchased power on the
decisions since that time. In anticipation of at least parts of this proposed Consolidated Statements of Income and Assets/Liabilities from risk
rule being made final, we have identified the following accounting management activities on the Consolidated Balance Sheets.
policies to be critical to the understanding of our financial statements
A S S E T I M PA I R M E N T
because their application requires significant judgment and reliance on
WPS Resources annually reviews its assets for impairment. Statement of
estimations of matters that are inherently uncertain.
Financial Accounting Standards No. 144, “Accounting for the Impairment
RISK MANAGEMENT ACTIVITIES and Disposal of Long-Lived Assets,” and Statement No. 142, “Goodwill
WPS Resources has entered into contracts that are accounted for as and Other Intangible Assets,” are the basis for these analyses.
derivatives under the provisions of Statement of Financial Accounting The review for impairment of tangible assets is more critical to WPS Power
Standards No. 133, “Accounting for Derivative Instruments and Hedging Development than to our other segments because of its significant
Activities,” as amended. At December 31, 2003, those derivatives not investment in property, plant, and equipment and lack of access to
designated as hedges are primarily commodity contracts to manage price regulatory relief that is available to our regulated segments. We believe
risk associated with wholesale and retail natural gas purchase and sale that the accounting estimate related to asset impairment of power plants
activities and electric energy contracts. Management’s expectations and is a “critical accounting estimate” because: (1) the estimate is susceptible
intentions are key factors in determining the appropriate accounting for to change from period to period because it requires company management
a derivative transaction, and as a result, such expectations and intentions to make assumptions about future market sales pricing, production costs,
are documented. Cash flow hedge accounting treatment may be used and generation volumes and (2) the impact that recognizing an impairment
when WPS Resources contracts to buy or sell a commodity at a fixed would have on the assets reported on our balance sheet and the net loss
price for future delivery corresponding with anticipated physical sales or on our income statement could be material. Management’s assumptions
purchases. Fair value hedge accounting may be used when WPS Resources about future market sales prices and generation volumes require significant
holds firm commitments and enters into transactions that hedge the judgment because actual market sales prices and generation volumes
risk that the price of a commodity may change between the contract’s have fluctuated in the past as a result of changing fuel costs, environmental
inception and the physical delivery date of the commodity. To the extent changes, and required plant maintenance and are expected to continue
that the fair value of a hedge instrument is fully effective in offsetting the to do so in the future.
transaction being hedged, there is no impact on income available for
W PS R E S O U R C E S CO R P O R ATI O N 37

Management’s Discussion and Analysis
The primary estimates used at WPS Power Development in this process has not previously been identified as a risk defaults, there could be
are future revenue streams and operating costs. A combination of input significant changes to the expense and uncollectible reserve balance.
from both internal and external sources is used to project revenue
streams. WPS Power Development’s operations group projects future PENSION AN D POSTR ETI R EMENT BEN EFITS
operating costs with input from external sources for fuel costs and The costs of providing non-contributory defined pension benefits and
forward energy prices. These estimates are modeled over the projected other postretirement benefits described in Note 19 to the Consolidated
remaining life of the power plants using the methodology defined in Financial Statements, are dependent upon numerous factors resulting
Statement No. 144. WPS Power Development evaluates property, plant, from actual plan experience and assumptions of future experience.
and equipment for impairment whenever indicators of impairment exist. Pension costs, for example, are impacted by actual employee demographics
Statement 144 requires that if the sum of the undiscounted expected (including age, compensation levels, and employment periods), the level
future cash flows from a company’s asset is less than the carrying value of contributions we make to the plan, and earnings on plan assets.
of the asset, an asset impairment must be recognized in the financial Changes made to the plan provisions may also impact current and future
statements. The amount of impairment recognized is calculated by pension costs. Pension costs may also be significantly affected by changes
reducing the carrying value of the asset to its fair value. in key actuarial assumptions, including anticipated rates of return on plan
Throughout 2003, WPS Power Development tested power plants for assets and the discount rates used in determining the projected benefit
recoverability whenever events or changes in circumstances indicated obligation and pension costs.
that their carrying amount may not be recoverable. No impairment Other postretirement benefit costs, for example, are impacted by actual
charges were recorded in 2003 as a result of these recoverability tests. employee demographics (including age and compensation levels), the
The merger of Wisconsin Fuel and Light into Wisconsin Public Service in level of contributions we make to the plans, earnings on plan assets, and
2001 resulted in Wisconsin Public Service recording goodwill related to its health care cost trends. Changes made to the plan provisions may also
gas utility segment. The goodwill is tested for impairment yearly based impact current and future other postretirement benefit costs. Other
on the guidance of Statement No. 142. The test for impairment includes postretirement benefit costs may also be significantly affected by
assumptions about future profitability of the gas utility segment and the changes in key actuarial assumptions, including anticipated rates of
correlation between our gas utility segment and published projections for return on plan assets, health care cost trend rates, and the discount
other similar gas utility segments. A significant change in the gas utility rates used in determining the postretirement benefit obligation and
market and/or our projections of future profitability could result in a loss postretirement costs.
being recorded on the income statement related to a decrease in the WPS Resources’ pension plan assets and other postretirement benefit
goodwill asset, as a result of the impairment test. plan assets are primarily made up of equity and fixed income investments.
Fluctuations in actual equity market returns as well as changes in general
R E C E I VA B L E S A N D R E S E RV E S
interest rates may result in increased or decreased pension costs in future
Our regulated gas and electric utilities and WPS Energy Services accrue
periods. Likewise, changes in assumptions regarding current discount
estimated amounts of revenue for services rendered but not yet billed.
rates and expected rates of return on plan assets could also increase or
Estimated unbilled sales are calculated using actual generation and
decrease recorded pension costs. Changes in assumptions regarding
throughput volumes, recorded sales, and weather factors. The estimated
current discount rates, health care cost trend rates, and expected rates
unbilled sales are assigned different rates based on historical customer
of return on plan assets could also increase or decrease recorded other
class allocations. Any difference between actual sales and the estimates
postretirement benefit costs. Management believes that such changes
or weather factors would cause a change in the estimated revenue.
in costs would be recovered at our regulated segments through the
WPS Resources reserves for potential uncollectible customer accounts as ratemaking process.
an expense on the income statement and an uncollectible reserve on the
The following chart reflects the sensitivities associated with a change
balance sheet. Wisconsin Public Service records a regulatory asset to
in certain actuarial assumptions by the indicated percentage. The chart
offset its uncollectible reserve. Due to the nature of the nonregulated
below reflects an increase or decrease in the percentage for each
energy marketing business having higher credit risk, the reserve is more
assumption, and how each change would impact the projected benefit
critical to WPS Energy Services than to our other segments. At WPS Energy
obligation, our net amount recognized on the balance sheet, and our
Services, the reserve is based on historical uncollectible experience and
reported annual pension cost on the income statement as they relate to
specific customer identification where practical. If the assumption that
our two large qualified pension plans. Each sensitivity below reflects an
historical uncollectible experience matches current customer default is
evaluation of the change based on a change in that assumption only.
incorrect, or if a specific customer with a large account receivable that
Impact on Impact on
Actuarial Assumption Percent Change Projected Benefit Net Amount Impact on
(Millions, except percentages) in Assumption Obligation Recognized Pension Cost
Discount rate (0.5) $34.0 $(0.6) $ 0.6
Discount rate 0.5 (37.6) 0.7 (0.7)
Rate of return on plan assets (0.5) N/A (2.7) 2.7
Rate of return on plan assets 0.5 N/A 2.7 (2.7)
38 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Impact on Impact on Impact on
Actuarial Assumption Percent Change Postretirement Postretirement Postretirement
(Millions, except percentages) in Assumption Benefit Obligation Benefit Liability Benefit Cost
Discount rate (0.5) $21.6 $2.5 $2.5
Discount rate 0.5 (20.0) (1.8) (1.8)
Health care cost trend rate (1.0) (37.4) (5.6) (5.6)
Health care cost trend rate 1.0 48.6 6.3 6.3
Rate of return on plan assets (0.5) N/A 0.6 0.6
Rate of return on plan assets 0.5 N/A (0.6) (0.6)
The chart above reflects the sensitivities associated with a change in assets is not assured, but are generally subject to review by regulators
certain actuarial assumptions by the indicated percentage. The chart in rate proceedings for matters such as prudence and reasonableness.
reflects an increase or decrease in the percentage for each assumption Management regularly assesses whether these regulatory assets and
and how each change would impact the projected other postretirement liabilities are probable of future recovery or refund by considering factors
benefit obligation, our reported other postretirement benefit liability on such as regulatory environment changes and the status of any pending or
the balance sheet, and our reported annual other postretirement benefit potential deregulation legislation. Once approved, we reduce regulatory
cost on the income statement. Each sensitivity above reflects an assets and liabilities by recognition in income over the rate recovery
evaluation of the change based on a change in that assumption only. period. If not approved, these regulatory assets or liabilities would be
recognized in income in the then current period.
In selecting an assumed discount rate, we consider long-term Corporate
Aa rated bond yield rates. In selecting an assumed rate of return on plan If our electric and gas utility segments no longer meet the criteria for
assets, we consider the historical returns and the future expectations for applying Statement No. 71, we would discontinue its application as
returns for each asset class, as well as the target allocation of the benefit defined under Statement No. 101, “Regulated Enterprises – Accounting for
trust portfolios. the Discontinuation of Application of FASB Statement No. 71.” Assets and
liabilities recognized solely due to the actions of rate regulation may no
The fair value of pension plan assets increased $92.7 million in 2003,
longer be recognized on the balance sheet and would be classified as an
decreased $47.8 million in 2002, and decreased $13.7 million in 2001.
extraordinary item in income for the period in which the discontinuation
As further described in Note 19 to the Consolidated Financial Statements,
occurs. A write-off of all WPS Resources’ regulatory assets and regulatory
as a result of the declining interest rate environment, we were required
liabilities at December 31, 2003, would result in a 3.0% decrease in total
to recognize an additional minimum liability as prescribed by Statement
assets, a 9.4% decrease in total liabilities, and a 122.5% increase in
No. 87. The liability was recorded as an intangible asset, a regulatory
Income before taxes.
asset, and a reduction to common equity through a charge to Other
comprehensive income. The charge to Other comprehensive income TA X P R O V I S I O N
could be restored through common equity in future periods to the As part of the process of preparing our consolidated financial statements,
extent fair value of trust assets exceed the accumulated benefit we are required to estimate our income taxes in each of the jurisdictions
obligation. Also, pension cost and cash funding requirements could in which we operate. This process involves estimating our actual current
increase in future years without continued improved asset returns. tax exposure together with assessing temporary differences resulting
The fair value of other postretirement benefit plan assets increased from differing treatment of items, such as depreciation, for tax and
$23.7 million in 2003, decreased $14.8 million in 2002, and decreased accounting purposes. These differences result in deferred tax assets and
$4.4 million in 2001. In selecting assumed health care cost trend rates, we liabilities, which are included within our consolidated balance sheet.
consider past performance and forecasts of health care costs. WPS Resources We must then assess the likelihood that our deferred tax assets will be
adjusted its health care cost trend rates upwards each of the last two years recovered from future taxable income and, to the extent we believe that
in an attempt to keep our health care cost trend rates in line with the rapidly recovery is not likely, we must establish a valuation allowance. Significant
increasing health care costs the country and WPS Resources have faced. management judgment is required in determining our provision for income
Also, other postretirement benefit cost and cash funding could increase taxes, our deferred tax assets and liabilities, and any valuation allowance
in future years without continued improved asset returns. recorded against our deferred tax assets. To the extent we establish a
valuation allowance or increase or decrease this allowance in a period,
R E G U L AT O R Y A C C O U N T I N G
we must include an expense or benefit within the tax provisions in the
The electric and gas utility segments of WPS Resources follow Statement
statements of operations.
of Financial Accounting Standards No. 71, “Accounting for the Effects of
Certain Types of Regulation,” and our financial statements reflect the effects
Related Party Transactions
of the different ratemaking principles followed by the various jurisdictions
regulating these segments. We defer certain items that would otherwise WPS Resources has investments in related parties that are accounted for
be immediately recognized as expenses and revenues because our regulators under the equity method of accounting. These include the investment at
have authorized deferral as regulatory assets and regulatory liabilities for WPS Investment, LLC, (a consolidated subsidiary of WPS Resources),
future recovery or refund to customers. Future recovery of regulatory in American Transmission Company, LLC, and Guardian Pipeline, LLC,
W PS R E S O U R C E S CO R P O R ATI O N 39

Management’s Discussion and Analysis
Wisconsin Public Service’s investment in Wisconsin River Power and Light, and Consolidated Water Power). The electric power from the
Company, and WPS Resources’ investment in WPSR Capital Trust I, and combustion turbine is sold in equal parts to Wisconsin Public Service and
WPS Nuclear Corporation’s (a consolidated subsidiary of WPS Resources) Wisconsin Power and Light. Wisconsin Public Service recorded related
investment in Nuclear Management Company, LLC. party transactions for service provided to and purchases from Wisconsin
River Power during 2003, 2002, and 2001. Revenues from service
American Transmission Company, LLC is a for-profit, transmission-only
provided to Wisconsin River Power were $1.4 million, $1.5 million,
company that owns, plans, maintains, monitors, and operates electric
and $0.9 million for 2003, 2002, and 2001, respectively. Purchases from
transmission assets in portions of Wisconsin, Michigan, and Illinois.
Wisconsin River Power by Wisconsin Public Service were $2.0 million,
At December 31, 2003, WPS Investment’s ownership in American
$2.1 million, and $1.7 million for 2003, 2002, and 2001, respectively.
Transmission Company was 19.8%. Wisconsin Public Service and
Upper Peninsula Power recorded related party transactions for services WPSR Capital Trust I was deconsolidated from the Consolidated
provided to and network transmission services received from American Financial Statements of WPS Resources at December 31, 2003, as
Transmission Company during 2003, 2002, and 2001. Charges to American required by the provisions of Financial Accounting Standards Board’s
Transmission Company for services provided by Wisconsin Public Service revised Interpretation No. 46 (“46R”) related to special purpose entities.
were $14.4 million, $12.9 million, and $11.3 million in 2003, 2002, Refer to Note 15 of WPS Resources’ Notes to the Consolidated Financial
and 2001, respectively. Upper Peninsula Power charged $7.6 million, Statements for further information on the deconsolidation of WPSR
$5.8 million, and $2.7 million for 2003, 2002, and 2001, respectively, Capital Trust I. As a result of the deconsolidation, WPS Resources
for services provided. Network transmission costs paid to American recorded a $1.5 million investment in the Trust within other current
Transmission Company by Wisconsin Public Service were $33.6 million, assets and a $51.5 million note payable to preferred stock trust, a related
$31.0 million, and $25.2 million in 2003, 2002, and 2001, respectively. Upper party, within the Consolidated Balance Sheet at December 31, 2003.
Peninsula Power recorded network transmission costs of $4.4 million, Prior periods have not been restated per the transition provisions of
$5.0 million, and $3.3 million in 2003, 2002, and 2001, respectively. Interpretation No. 46R. The Trust remains consolidated within the
December 31, 2002, Consolidated Balance Sheet and the interest
Guardian Pipeline, LLC owns a natural gas pipeline, which began operating
payments on the debentures are reflected within interest expense and
in 2002, that stretches about 140 miles from near Joliet, Illinois, into
distributions on trust preferred securities on the Consolidated Statements
southern Wisconsin. WPS Investments, LLC purchased its 33% interest
of Income for all years presented.
in Guardian Pipeline, LLC on May 30, 2003.
On January 8, 2004, we redeemed all of the subordinated debentures
Wisconsin River Power Company, of which Wisconsin Public Service
that were initially issued to the Trust for $51.5 million and paid accrued
owns 50% of the voting stock, operates an oil-fired combustion turbine
interest of $0.1 million. This action required the Trust to redeem an equal
and two hydroelectric plants on the Wisconsin River. The energy output
amount of trust securities at face value plus any accrued interest and
from the hydroelectric plants is sold in equal parts to the three companies
unpaid distributions. As a result of these transactions, the Trust has
that previously owned equal portions of all the outstanding stock of
been dissolved effective January 8, 2004.
Wisconsin River Power (Wisconsin Public Service, Wisconsin Power
Nuclear Management Company is owned by affiliates of five utilities
in the upper Midwest and operates the six nuclear power plants of these
utilities. At December 31, 2003, WPS Nuclear Corporation’s ownership
in Nuclear Management Company was 20%. Wisconsin Public Service
recorded related party transactions for services provided by Nuclear
Management Company for the management and operation of the
Kewaunee nuclear plant. Management service fees paid to Nuclear
Management Company by Wisconsin Public Service were $25.2 million,
$24.6 million, and $16.4 million in 2003, 2002, and 2001, respectively.
Management service fees paid to Nuclear Management Company in 2003
and 2002 reflect a 17.8% increase in Wisconsin Public Service’s ownership
of the Kewaunee plant after acquiring Madison Gas and Electric Company’s
ownership in the Kewaunee plant on September 24, 2001.
Wisconsin Public Service’s and Upper Peninsula Power’s Line
Electricians have the skills to come through for our customers
in any kind of weather, at any time of day or night, and in any
type of terrain. Response time and reliability are of prime
importance for ensuring customer satisfaction.
40 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Trends Commission of Wisconsin has approved recovery of the costs associated
with voluntary nitrogen oxide reductions.
E N V I R O N M E N TA L
Air quality modeling by the Wisconsin Department of Natural Resources
WPS Resources and its subsidiaries are subject to federal, state, and local
revealed that Weston Units 1 and 2 contribute to a modeled exceedance
regulations regarding environmental impacts of their operations on air
of the sulfur dioxide ambient air quality standard. Wisconsin Public
and water quality and solid waste. The application of federal and state
Service expects that compliance with a future limit can be achieved by
restrictions to protect the environment can involve review, certification, or
managing the coal supply quality. Wisconsin Public Service is cooperating
issuance of permits by various federal and state authorities, including the
with the Wisconsin Department of Natural Resources to develop an
United States Environmental Protection Agency and the various states’
approach to resolve this issue.
environmental agencies, including the Wisconsin Department of Natural
Resources. These restrictions may limit, prevent, or substantially increase the In November 1999, the United States Environmental Protection Agency
cost of the operation of generation facilities and may require substantial announced the commencement of a Clean Air Act enforcement initiative
investments in new equipment at existing installations. Such restrictions may targeting the utility industry. This initiative resulted in the issuance of
require substantial additional investments for new projects and may delay several notices of violation/findings of violation and the filing of lawsuits
or prevent completion of projects. We cannot forecast the effects of such against other unaffiliated utilities. In these enforcement proceedings, the
regulation on our generation, transmission, and other facilities or operations. United States Environmental Protection Agency claims that the utilities
made modifications to the coal-fired boilers and related equipment at the
WPS Power Development is subject to regulation by the United States
utilities’ electric generating stations without first obtaining appropriate
Environmental Protection Agency and environmental regulation in Maine,
permits under the United States Environmental Protection Agency’s
New York, Pennsylvania, and Wisconsin with respect to thermal and other
pre-construction permit program and without installing appropriate air
discharges from its power plants. New legislation could negatively impact
pollution control equipment. In addition, the United States Environmental
future cash flows and impact WPS Power Development’s ability to compete
Protection Agency is claiming, in certain situations, that there were
with regulated utilities, which are allowed recovery of these costs.
violations of the Clean Air Act’s “new source performance standards.”
WPS Energy Services is not directly subject to significant environmental In the matters where actions have been commenced, the federal government
regulations at this time. is seeking penalties and the installation of pollution control equipment.
Wisconsin Public Service continues to investigate the environmental If the federal government decided to bring a claim against Wisconsin
cleanup of ten manufactured gas plant sites, two of which were Public Service and if it were determined by a court that historic projects
previously owned by Wisconsin Fuel and Light. As of the fall of 2003, at the Pulliam and Weston electric generating stations required either
cleanup of the land portion at five sites was substantially complete. a state or federal Clean Air Act permit, Wisconsin Public Service may,
Groundwater treatment and monitoring at these sites will continue into under the applicable statutes, be required to:
the future. River sediment remains to be addressed at six sites with • shut down any unit found to be operating in non-compliance,
sediment contamination. Wisconsin Public Service estimates remaining
• install additional pollution control equipment,
future undiscounted investigation and cleanup costs for all remaining site
work to be $36.2 million to $40.6 million and recorded a $36.2 million • pay a fine, and/or
liability for gas plant cleanup with an offsetting regulatory asset at • pay a fine and conduct a supplemental environmental project in
December 31, 2003. Wisconsin Public Service expects to recover cleanup order to resolve any such claim.
costs net of insurance recoveries in future customer rates.
The Wisconsin Department of Natural Resources initiated a rulemaking
The United States Environmental Protection Agency has designated effort to control mercury emissions. Coal-fired generation plants are the
southeastern Wisconsin as an ozone non-attainment area. Under the primary targets of this effort. The proposed rule was open to comment in
Clean Air Act, the state of Wisconsin developed a nitrogen oxide October 2001. As proposed, the rule requires phased-in mercury emission
reduction plan for Wisconsin’s ozone non-attainment area. The nitrogen reductions reaching 90% reduction in 15 years. Wisconsin Public Service
oxide reductions began in 2003 and will gradually increase through 2007. estimates that it could cost approximately $163 million to achieve the
Wisconsin Public Service owns 31.8% of Edgewater Unit 4, which is proposed 90% reductions. Presently, the proposed rule is on hold, and
located in the ozone non-attainment area. A compliance plan for this unit it is uncertain if the state will proceed to finalize the regulations.
was initiated in 2000. Wisconsin Public Service’s share of the costs of this
In December 2003, the United States Environmental Protection Agency
project is expected to be approximately $5 million. The project is nearly
proposed mercury “maximum achievable control technology” standards
complete. Wisconsin Public Service has incurred approximately $4.9 million
and an alternative mercury “cap and trade” program substantially
on this project as of December 31, 2003.
modeled on the Clear Skies legislation initiative. In addition, the United
The state of Wisconsin is also seeking voluntary reductions from utility States Environmental Protection Agency proposed the Interstate Air
units outside the ozone non-attainment area, which may lead to Quality rule, which would reduce sulfur dioxide and nitrogen oxide
additional expenditures for nitrogen oxide reductions at other units. emissions from utility boilers located in 29 states, including Wisconsin.
Wisconsin Public Service is participating in voluntary efforts to reduce Wisconsin Public Service is in the process of studying the proposed rules.
nitrogen oxide levels at the Columbia Energy Center. Wisconsin Public As to the mercury “maximum achievable control technology” proposal, it
Service owns 31.8% of the Columbia facility. The Public Service requires existing units burning sub-bituminous coal to achieve an annual
W PS R E S O U R C E S CO R P O R ATI O N 41

Management’s Discussion and Analysis
average mercury emission rate limit of 5.8 pounds per trillion Btu on a uncontracted merchant exposure and redeploy capital into markets
unit-by-unit or plant-wide basis. New units must achieve an emission with different risk profiles. In addition, in January 2004, WPS Power
rate limit of 0.020 pounds per gigawatt-hour. If the proposed rule is Development entered into an agreement to lease most of its generation
promulgated, Wisconsin Public Service’s current analysis indicates that relating to continuing operations to WPS Energy Services. WPS Energy
the emission control equipment on the existing units may be sufficient Services will utilize various financial tools, including forwards and
to achieve the proposed limitation. New units will require additional options, to limit exposure and extract additional value from volatile
mercury control techniques to reduce mercury emissions by 65% to commodity prices.
85%. Mercury control technology is still in development. Wisconsin
Public Service is assessing potential mercury control technologies for S Y N T H E T I C F U E L O P E R AT I O N
application to future new coal-fired units. We have significantly reduced our consolidated federal income tax
liability for the past four years through tax credits available to us under
The Interstate Air Quality rule proposal allows the affected states Section 29 of the Internal Revenue Code for the production and sale
(including Wisconsin) to either require utilities located in the state to of solid synthetic fuel from coal. In order to maximize the value of
participate in an interstate cap and trade program or meet the state’s our synthetic fuel production facility, we have reduced our interest
emission budget for nitrogen oxide and sulfur dioxide through measures in the facility from 67% to 23% through sales to third parties (see
to be determined by the state. Wisconsin has not stated a preference as Note 6 – Acquisitions and Sales of Assets). Our ability to fully utilize
to which option it would select in the event the rule becomes final. While the Section 29 tax credits that remain available to us in connection
the effect of the rule on Wisconsin Public Service’s facilities is uncertain with our remaining interest in the facility will depend on whether
for planning purposes, it is assumed that additional nitrogen oxides and the amount of our federal income tax liability is sufficient to permit
sulfur dioxide controls will be needed on existing units or the existing units the use of such credits. The Internal Revenue Service strictly enforces
will need to be converted to natural gas by 2010. The installation of any compliance with all of the technical requirements of Section 29.
controls and/or any conversion to natural gas will need to be scheduled Section 29 tax credits are currently scheduled to expire at the end
as part of Wisconsin Public Service’s long-term maintenance plan for its of 2007.
existing units. As such, controls or conversions may need to take place
before the proposed 2010 compliance date. On a preliminary basis and On June 27, 2003, the Internal Revenue Service announced that it had
assuming controls or conversion is required, Wisconsin Public Service reason to question the scientific validity of certain test procedures and
estimates a cost of $288 million in order to meet a 2010 compliance date. results that have been presented by certain taxpayers to qualify for
This estimate is based on costs of current control technology. Section 29 credits. The Internal Revenue Service also announced that it
was reviewing information regarding these test procedures and practices.
The generation assets of WPS Power Development are subject to However, on October 29, 2003, the Internal Revenue Service announced
regulations on sulfur dioxide and nitrogen oxide emissions similar to that it had closed its investigation and concluded that such tests and
those that apply to Wisconsin Public Service. In addition, the Sunbury procedures were scientifically valid if properly applied and indicated
generation facilities of WPS Power Development are located in an ozone it would issue additional guidance on future sampling and testing.
transport region. As a result, these generation facilities are subject to WPS Resources believes that its synthetic fuel facility does and will
additional restrictions on emissions of nitrogen oxide. Although WPS Power comply with such guidelines.
Development has some emission allowances for 2004 for the Sunbury
facility, it may need to purchase approximately 10,000 to 15,000 additional As a result of the June 2003 Internal Revenue Service announcement,
allowances at market rates, to meet its 2004 requirements. on August 1, 2003, WPS Resources received notice from the Internal
Revenue Service that the WPS Resources’ affiliate through which it
E N E R G Y A N D C A PA C I T Y P R I C E S holds an ownership interest in a synthetic fuel facility was under
Prices for electric energy and capacity have been extremely volatile over review for the 2001 tax period and that, depending upon the review
the past three years. WPS Resources’ nonregulated entities are impacted of the affiliate’s 2001 tax return, the Internal Revenue Service might
by this volatility, which has been driven by the exit of many of the largest reexamine the affiliate’s 2000 tax return. However, following the
speculative traders, the slow down in the economy, and significant October announcement that the Internal Revenue Service was closing
overbuilding of generation capacity. its investigation, WPS Resources received preliminary notice in
January 2004 that both audits related to this issue have closed without
Although electric energy prices are currently high due to increased
adjustment. Future years remain open to audit. We continue to believe
natural gas prices, we expect that electric capacity prices will continue
that the facility has been operated in compliance with the requirements
to be depressed for several years. Pressure on capacity prices will
of Section 29.
continue until existing reserve margins are depleted either by load
growth or capacity retirements. WPS Power Development has been The Permanent Subcommittee on Investigations of the Senate Committee
negatively impacted by the depressed capacity prices and volatile on Governmental Affairs has been conducting an investigation of the
energy prices discussed above, and as a result we have taken certain synthetic fuel industry and their use of Section 29 tax credits. Pursuant
steps to reduce our exposure to the merchant marketplace. to its invitation, on January 30, 2004, we answered questions of the
Committee regarding our synthetic fuel facility. It is not known when
On October 23, 2003, a definitive agreement was signed to sell
the investigation will be completed and what impact, if any, such
WPS Power Development’s Sunbury generating facility to a subsidiary
investigation may have on future legislation or the enforcement policy
of Duquesne Light Holdings. The pending sale will allow us to reduce
of the Internal Revenue Service.
42 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
We have recorded approximately $81.3 million of Section 29 tax credits N EW ACCOUNTI NG PRONOUNCEMENTS
as reductions of income tax expense from the project’s inception in IMPACT OF ISSUE 02-03 ON WPS ENERGY SERVICES’ REVENUES
June 1998 through December 31, 2003. As a result of alternative As required, on January 1, 2003, WPS Energy Services adopted Issue
minimum tax rules, about $52.3 million of this tax benefit has been No. 02-03. Upon adoption, Issue 02-03 required revenues related
carried forward as a deferred tax asset as of December 31, 2003. Future to derivative instruments classified as trading to be reported net of
payments under one of the agreements covering the sale of a portion related cost of sales for all periods presented. Prior to January 1, 2003,
of our interest in the facility are contingent on the facility’s continued WPS Energy Services classified all its activities as trading in accordance
production of synthetic fuel. Any disallowance of some or all of those with the accounting standards in effect at that time. Consistent with
tax credits would materially affect the related deferred tax account, the new accounting standards under Issue 02-03, effective January 1,
as well as future tax obligations. Additionally, such disallowances may 2003, WPS Energy Services classifies as trading activities only those
also result in a reduction of the level of synthetic fuel production at the transactions that at inception are intended to be settled in the near
facility, thus reducing the likelihood and amount of future payments term with the objective of generating profits on short-term differences
under that agreement. Future tax legislation and Internal Revenue in prices. As a result of the change in the definition of trading, a larger
Service review may also affect the value of the credits and the value portion of WPS Energy Services’ business activities were classified as
of our share of the facility. trading in 2002 than in 2003. Therefore, previously reported revenues
for 2002 and 2001 have been reclassified to be shown net of cost of fuel,
I N DUSTRY R ESTRUCTU R I NG
natural gas, and purchased power, while most 2003 revenues continue
To the extent competitive pressures increase and the pricing and sale of
to be reported on a gross basis. The retroactive reclassification to net
electricity assumes more of the characteristics of a commodity business,
revenues and cost of sales for 2002 and 2001 trading activities resulted
the economics of our business may come under increasing pressure. In
in a $1,127.4 million and $1,243.7 million decrease to WPS Resources’
addition, regulatory changes may increase access to electric transmission
previously reported consolidated nonregulated revenues, respectively,
grids by utility and nonutility purchasers and sellers of electricity, thus
and a corresponding $1,127.4 million and $1,243.7 million decrease to
potentially resulting in a significant number of additional competitors in
previously reported consolidated nonregulated cost of fuel, natural gas,
wholesale power generation.
and purchased power for the years ended December 31, 2002 and 2001,
Deregulation of the electric and natural gas utilities has begun in respectively. Neither margins, income, nor cash flows for 2002 were
Wisconsin, particularly for natural gas service. Currently, the largest impacted by the reclassification of revenue upon adoption of Issue 02-03.
natural gas customers can purchase natural gas from suppliers other
than their local utility. Efforts are underway to make it easier for smaller
natural gas customers to do the same. In addition, the Public Service
Commission of Wisconsin has been studying how to deregulate the
state’s electric supply. We believe electric deregulation inside Wisconsin
is at least several years off as the state is focused on improving reliability
by building more generation and transmission facilities and creating fair
market rules. As electric choice occurs, we believe we will lose some
generation load, which could negatively impact future cash flows, but
will retain the delivery revenues and margin. Also, the capacity that is
freed up should be competitive in our marketplace. Deregulation of
electricity is present in Michigan; however, no customers have chosen
an alternative electric supplier and no alternative electric suppliers have
offered to serve any customers in Michigan’s Upper Peninsula due to
the lack of transmission capacity in the areas we serve, which is a barrier
to competitive suppliers entering the market.
In February 2004 the Michigan Public Service Commission issued an
interim order providing electric rate relief to Detroit Edison in a manner
that could negatively impact the competitive electric supply market in
the area served by this utility. As a result of the interim order, customers
of competitive electric suppliers will experience a decrease in cost savings
compared to the bundled utility rate, potentially making electric choice
less attractive to energy consumers. WPS Energy Services serves
customers in the impacted area and therefore the interim order could
negatively impact future electric revenues and margins at this business. Leah Charbarneau, Collections
We will work to obtain modifications to the interim order as the final Service Specialist in Rhinelander,
rate order is not expected until September 2004. Wisconsin, coordinates credit
activities for a number of
northern districts of Wisconsin
Public Service.
W PS R E S O U R C E S CO R P O R ATI O N 43

Management’s Discussion and Analysis
In Waupaca,Wisconsin, Joel Anderson
(on the truck), Lead Line Electrician
for Wisconsin Public Service, and
Todd Maas, Line Electrician, replace
a hollow pole with a new, safer pole.
ASSET RETIREMENT OBLIGATIONS COSTS OF REMOVAL
Effective January 1, 2003, WPS Resources adopted Statement No. 143. The utility segments of WPS Resources recognize removal costs for utility
Under the new accounting standard, WPS Resources recognizes, at assets. Historically, these removal costs were reflected as a component of
fair value, legal obligations associated with the retirement of tangible depreciation expense and accumulated depreciation in accordance with
long-lived assets that result from the acquisition, construction, or regulatory treatment. The staff of the Securities and Exchange Commission
development and/or normal operation of the asset. The associated recently expressed their views on the balance sheet classification of these
retirement costs are capitalized as part of the related long-lived asset costs of removal and required that the amounts be reclassified from
and depreciated over their useful life. Legal retirement obligations accumulated depreciation to a liability. As a result, WPS Resources
identified for the regulated segments of WPS Resources relate primarily reclassified $463.3 million of removal costs from accumulated depreciation
to the final decommissioning of the Kewaunee nuclear power plant. to nuclear decommissioning and other costs of removal at December 31,
The nonregulated segments identified a legal retirement obligation 2002. WPS Resources identified legal retirement obligations associated with
related to the closure of an ash basin located at the Sunbury generation the removal of certain utility assets upon implementation of Statement
plant. The adoption of Statement No. 143 had no impact on the No. 143 in January 2003. Upon the adoption of Statement No. 143 on
earnings or cash flows of the regulated segment as the effects were January 1, 2003, costs of removal with associated legal obligations of
offset by the establishment of regulatory assets and liabilities pursuant $290.5 million were removed from nuclear decommissioning and other
to Statement No. 71, “Accounting for the Effects of Certain Types of costs of removal as these costs are now accounted for as asset retirement
Regulation,” and reduced earnings of the nonregulated segment by obligations. Costs of removal that were not identified as having an
$0.3 million, recorded as a cumulative effect of change in accounting associated legal retirement obligation were reclassified from nuclear
principle. Upon implementation of Statement No. 143 in the first quarter decommissioning and other costs of removal to a regulatory liability
of 2003, we recorded a net asset retirement cost of $90.8 million at December 31, 2003. Income available for common shareholders
(decreased to $78.5 million at December 31, 2003, due to depreciation and cash flows were not impacted by this accounting change.
being recorded) and an asset retirement obligation of $324.8 million
upon adoption of Statement No. 143 (increased to $344.0 million at VARIABLE INTEREST ENTITIES
December 31, 2003, as a result of accretion being recorded). The In January 2003, the Financial Accounting Standards Board issued
difference between previously recorded liabilities of $290.5 million Interpretation No. 46, “Consolidation of Variable Interest Entities, an
and the cumulative effect of adopting Statement No. 143 was deferred Interpretation of Accounting Research Bulletin No. 51,” in order to
to a regulatory liability pursuant to Statement No. 71. improve financial reporting by companies involved with variable interest
44 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
entities. Interpretation No. 46 requires certain variable interest entities Quantitative and Qualitative
to be consolidated by the primary beneficiary of the entity if the equity Disclosures About Market Risk
investors in the entity do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to MARKET RISKS
finance its activities without additional subordinated financial support WPS Resources has potential market risk exposures related to
from other parties. On December 24, 2003, the Financial Accounting commodity price risk, interest rate risk, equity return, and principal
Standards Board issued a revision to Interpretation No. 46 (“46R”) in preservation risk. The current exposure to foreign currency exchange
order to clarify some of the provisions of Interpretation No. 46 and to rate risk is not significant. WPS Resources has risk management
exempt certain entities from its requirements. The effective implementation policies in place to monitor and assist in controlling these market
date of Interpretation No. 46 was also modified by Interpretation No. 46R. risks and may use derivative and other instruments to manage some
The application of Interpretation No. 46R was required for financial of these exposures.
statements of public entities that have interests in special-purpose entities
I N T E R E S T R AT E R I S K
for periods ending after December 15, 2003. WPS Resources identified
WPS Resources and Wisconsin Public Service are exposed to interest rate
WPSR Capital Trust I as a special purpose entity that is within the scope
risk resulting from their variable rate long-term debt and short-term
of Interpretation No. 46R. See Note 15 – Company-Obligated Mandatorily
commercial paper borrowing. Exposure to interest rate risk is managed
Redeemable Trust Preferred Securities of Preferred Stock Trust, for further
by limiting the amount of variable rate obligations and continually
discussion of the impacts of implementing this portion of Interpretation
monitoring the effects of market changes in interest rates. WPS Resources
No. 46R on the financial statement of WPS Resources. For all other types
and Wisconsin Public Service enter into long-term fixed rate debt when it
of variable interest entities, the application of Interpretation No. 46R
is advantageous to do so. WPS Resources and Wisconsin Public Service
will be required in the first quarter of 2004. We do not anticipate a
may also enter into derivative financial instruments, such as swaps, to
significant impact to the financial statements of WPS Resources in the
mitigate interest rate exposure. At December 31, 2003, and 2002,
first quarter of 2004 as a result of adopting the remaining provisions
WPS Resources utilized one interest rate swap to fix the interest rate
of Interpretation No. 46R.
on a variable rate loan at one of its nonregulated subsidiaries.
MEDICARE PRESCRIPTION DRUG, IMPROVEMENT Based on the variable rate debt of WPS Resources and Wisconsin Public
AND MODERNIZATION ACT OF 2003 Service outstanding at December 31, 2003, a hypothetical increase in
In January 2004, the Financial Accounting Standards Board issued Staff market interest rates of 100 basis points in 2004 would increase annual
Position (FSP) 106-1, “Accounting and Disclosure Requirements Related interest expense by approximately $0.7 million and $0.1 million,
to the Medicare Prescription Drug, Improvement and Modernization respectively. Comparatively, based on the variable rate debt outstanding at
Act of 2003.” FSP 106-1 permits a sponsor of a postretirement health December 31, 2002, an increase in interest rates of 100 basis points would
care plan that provides a prescription drug benefit to make a one-time have increased interest expense in 2003 by approximately $0.6 million and
election to defer accounting for the effects of the Medicare Prescription $0.3 million. These amounts were determined by performing a sensitivity
Drug, Improvement and Modernization Act of 2003, which was signed analysis on the impact of a hypothetical 100 basis points increase in
into law on December 8, 2003. Regardless of whether a sponsor elects interest rates on the variable rate debt of WPS Resources and Wisconsin
that deferral, the FSP required certain disclosures pending further Public Service outstanding as of December 31, 2003, and 2002. This
consideration of the underlying accounting issues. In accordance with sensitivity analysis was performed assuming a constant level of variable
FSP 106-1, we have elected to defer accounting for the effects of this rate debt during the period and an immediate increase in the levels of
legislation until authoritative guidance on the accounting for the interest rates with no other subsequent changes for the remainder of the
legislation is issued. Refer to Note 19 – Employee Benefit Plans for period. In the event of a significant change in interest rates, management
further information. would take action to mitigate WPS Resources’ and Wisconsin Public
Service’s exposure to the change.
Impact of Inflation
Our financial statements are prepared in accordance with accounting COMMODITY PRICE RISK
principles generally accepted in the United States of America and report WPS Resources is exposed to commodity price risk resulting from the
operating results in terms of historic cost. The statements provide a impact of market fluctuations in the price of certain commodities,
reasonable, objective, and quantifiable statement of financial results; including but not limited to electricity, natural gas, coal, fuel oil, and
but they do not evaluate the impact of inflation. Under rate treatment uranium, which are used and/or sold by our subsidiaries in the normal
prescribed by utility regulatory commissions, Wisconsin Public Service’s course of their business. We employ established policies and procedures
and Upper Peninsula Power’s projected operating costs are recoverable to reduce the market risk associated with changing commodity prices,
in revenues. Because rate forecasting assumes inflation, most of the including using various types of commodity and derivative instruments.
inflationary effects on normal operating costs are recoverable in rates. WPS Resources’ exposure to commodity price risk in its regulated utilities
However, in these forecasts, Wisconsin Public Service and Upper is significantly mitigated by the current ratemaking process for the
Peninsula Power are only allowed to recover the historic cost of plant recovery of its electric fuel and purchased energy costs as well as its cost
via depreciation. of natural gas purchased for resale. Therefore, the value-at-risk amounts
discussed below do not include measures for WPS Resources’ regulated
W PS R E S O U R C E S CO R P O R ATI O N 45

Management’s Discussion and Analysis
utilities. To further manage commodity price risk, our regulated utilities For the year ended December 31, 2003, the average, high, and low
enter into contracts of various durations for the purchase and/or sale of VaR amounts for WPS Energy Services were $0.5 million, $0.8 million,
natural gas, fuel for electric generation, and electricity. and $0.4 million, respectively. The same amounts for the year ended
December 31, 2002, were $0.5 million, $0.7 million, and $0.4 million.
WPS Power Development utilizes purchase and/or sale contracts for
For the year ended December 31, 2003, the average, high, and low VaR
electric fuel and electricity to help manage its commodity price risk.
amounts for WPS Power Development were $0.7 million, $1.3 million,
WPS Energy Services uses derivative financial and commodity instruments
and $0.3 million, respectively. The same amounts for the year ended
to reduce market risk associated with the changing prices of natural gas
December 31, 2002, were $1.5 million, $3.2 million, and $0.3 million.
and electricity sold at firm prices to customers. WPS Energy Services
The average, high, and low amounts were computed using the VaR
also utilizes these instruments to manage market risk associated with
amounts at the beginning of the reporting period and the four quarter-
anticipated energy purchases.
end amounts.
For purposes of risk management disclosure, WPS Power Development’s
and WPS Energy Services’ activities are classified as non-trading. The E Q U I T Y R E T U R N A N D P R I N C I P A L P R E S E R V AT I O N R I S K
value-at-risk amounts discussed below are presented separately for both WPS Resources and Wisconsin Public Service currently fund liabilities
WPS Power Development and WPS Energy Services due to the differing related to employee benefits and nuclear decommissioning through
market and timing exposures of each entity. various external trust funds. These funds are managed by various
investment managers and hold investments in debt and equity securities.
V A L U E - AT - R I S K Changes in the market value of these investments can have an impact on
To measure commodity price risk exposure, WPS Resources performs the future expenses related to these liabilities. WPS Resources maintains
a value-at-risk (VaR) analysis of its exposures. two main qualified pension plans. The pension liability for the Non-
Administrative Employees Retirement Plan is currently over funded
VaR is used to describe a probabilistic approach to quantifying the exposure
and no contributions to the plan are required. The pension liability for
to market risk. The VaR amount represents an estimate of the potential
the Administrative Employees Retirement Plan has risen due to plan
change in fair value that could occur from changes in market factors, within
design changes and historically low interest rates. The liability of the
a given confidence level, if an instrument or portfolio is held for a specified
Administrative Employees Retirement Plan exceeded the value of the
time period. VaR models are relatively sophisticated. However, the
Plan’s assets by $64.9 million at December 31, 2003, and WPS Resources
quantitative risk information is limited by the parameters established in
was, therefore, required to recognize a minimum pension liability as
creating the model. The instruments being used may have features that
prescribed by SFAS No. 87. Declines in the equity markets or continued
could trigger a potential loss in excess of the calculated amount if the changes
declines in interest rates may result in increased future pension costs for
in the underlying commodity price exceed the confidence level of the model
these plans and possible future required contributions. Changes in the
used. VaR is not necessarily indicative of actual results that may occur.
market value of investments related to other employee benefits or nuclear
VaR is estimated using a delta-normal approximation based on a decommissioning could also impact future contributions. WPS Resources
one-day holding period and a 95% confidence level. The delta-normal monitors the trust fund portfolios by benchmarking the performance of
approximation is based on the assumption that changes in the value the investments against certain security indices. All decommissioning
of the portfolio over short time periods, such as one day, are normally costs and most of the employee benefit costs relate to WPS Resources’
distributed. It does not take into account higher order risk exposures, so regulated utilities. As such, the majority of these costs are recovered in
it may not provide a good approximation of the risk in a portfolio with customers’ rates, mitigating the equity return and principal preservation
substantial option positions. We utilized a delta-normal approximation risk on these exposures.
because our portfolio has limited exposure to optionality. Our VaR
calculation includes derivative financial and commodity instruments, F O R E I G N C U R R E N C Y E X C H A N G E R AT E R I S K
such as forwards, futures, swaps, and options as well as commodities WPS Resources is exposed to foreign currency risk as a result of foreign
held in inventory, such as natural gas held in storage to the extent operations owned and operated in Canada and transactions denominated
such positions are significant. in Canadian dollars for the purchase and sale of natural gas and electricity
by our nonregulated subsidiaries. Forward foreign exchange contracts
Our VaR amount for WPS Energy Services was calculated to be $0.8 million designated as fair value hedges are utilized to manage the risk associated
at December 31, 2003, compared to $0.5 million at December 31, 2002. with currency fluctuations on certain firm sales and sales commitments
Our VaR amount for WPS Power Development was calculated to be denominated in Canadian dollars and certain Canadian dollar
$1.2 million at December 31, 2003, compared with $0.3 million at denominated asset and liability positions. WPS Resources’ exposure
December 31, 2002. The increase for WPS Power Development was to foreign currency risk was not significant at December 31, 2003,
primarily due to increased volatility in our forward price curve for or 2002.
electricity. A significant portion of this VaR amount is mitigated by
WPS Power Development’s generating capabilities, which are excluded
from the VaR calculation as required by the Securities and Exchange
Commission rules.
46 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Consolidated Statements of Income
Year Ended December 31 (Millions, except per share data) 2003 2002 2001
Nonregulated revenue $3,137.6 $ 410.8 $ 370.5
Utility revenue 1,183.7 1,050.3 974.9
Total revenues 4,321.3 1,461.1 1,345.4
Nonregulated cost of fuel, gas, and purchased power 3,016.6 339.7 334.3
Utility cost of fuel, gas, and purchased power 532.3 419.0 444.6
Operating and maintenance expense 459.5 412.5 333.0
Depreciation and decommissioning expense 138.4 94.8 84.1
Taxes other than income 43.8 39.9 36.7
Operating income 130.7 155.2 112.7
Miscellaneous income 63.6 47.8 37.5
Interest expense and distributions on trust preferred securities (55.6) (55.8) (53.4)
Minority interest 5.6 – –
Other income (expense) 13.6 (8.0) (15.9)
Income before taxes 144.3 147.2 96.8
Provision for income taxes 33.7 28.7 9.2
Income from continuing operations 110.6 118.5 87.6
Discontinued operations, net of tax (16.0) (6.0) (6.9)
Net income before cumulative effect of change in accounting principles 94.6 112.5 80.7
Cumulative effect of change in accounting principles, net of tax 3.2 – –
Net income before preferred stock dividends of subsidiary 97.8 112.5 80.7
Preferred stock dividends of subsidiary 3.1 3.1 3.1
Income available for common shareholders $ 94.7 $ 109.4 $ 77.6
Average shares of common stock
Basic 33.0 31.7 28.2
Diluted 33.2 32.0 28.3
Earnings per common share (basic)
Income from continuing operations $3.26 $3.64 $3.00
Discontinued operations (0.49) (0.19) (0.25)
Cumulative effect of change in accounting principles 0.10 – –
Earnings per common share (basic) $2.87 $3.45 $2.75
Earnings per common share (diluted)
Income from continuing operations $3.24 $3.61 $2.99
Discontinued operations (0.49) (0.19) (0.25)
Cumulative effect of change in accounting principles 0.10 – –
Earnings per common share (diluted) $2.85 $3.42 $2.74
Dividends per common share $2.16 $2.12 $2.08
The accompanying notes to WPS Resources Corporation’s
consolidated financial statements are an integral part of these statements.
W PS R E S O U R C E S CO R P O R ATI O N 47

Consolidated Balance Sheets
At December 31 (Millions) 2003 2002
Assets
Cash and cash equivalents $ 50.7 $ 43.3
Restricted funds 3.2 4.2
Accounts receivable – net of reserves of $6.6 and $7.0, respectively 502.4 293.3
Accrued unbilled revenues 90.0 105.9
Inventories 178.3 110.3
Current assets from risk management activities 518.1 406.6
Assets held for sale 116.4 121.2
Other current assets 86.4 67.1
Current assets 1,545.5 1,151.9
Property, plant, and equipment, net 1,828.7 1,712.3
Nuclear decommissioning trusts 332.3 290.5
Regulatory assets 127.7 110.9
Long-term assets from risk management activities 104.3 135.3
Other 353.8 270.3
Total assets $4,292.3 $3,671.2
Liabilities and Shareholders’ Equity
Short-term debt $ 38.0 $ 29.8
Current portion of long-term debt 56.6 71.1
Note payable to preferred stock trust 51.5 –
Accounts payable 510.7 452.0
Current liabilities from risk management activities 517.3 443.8
Liabilities held for sale 2.7 0.6
Other current liabilities 86.9 53.1
Current liabilities 1,263.7 1,050.4
Long-term debt 871.9 824.4
Deferred income taxes 80.5 73.7
Deferred investment tax credits 17.7 19.3
Regulatory liabilities 304.4 49.7
Environmental remediation liabilities 37.9 40.2
Pension and postretirement benefit obligations 137.7 70.6
Long-term liabilities from risk management activities 92.2 109.7
Asset retirement obligations 344.0 –
Nuclear decommissioning and other costs of removal – 463.3
Other 88.0 86.0
Long-term liabilities 1,974.3 1,736.9
Company-obligated mandatorily redeemable trust preferred
securities of trust holding solely WPS Resources
7.00% subordinated debentures – 50.0
Preferred stock of subsidiary with no mandatory redemption 51.1 51.1
Common stock equity 1,003.2 782.8
Total liabilities and shareholders’ equity $4,292.3 $3,671.2
The accompanying notes to WPS Resources Corporation’s
consolidated financial statements are an integral part of these statements.
48 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Consolidated Statements of Common Shareholders’ Equity
Employee Stock Accumulated
Plan Guarantees Capital in Other
Comprehensive and Deferred Common Excess of Retained Treasury Comprehensive
(Millions) Income Total Compensation Trust Stock Par Value Earnings Stock Income (Loss)
Balance at December 31, 2000 $ – $548.1 $(3.2) $26.9 $177.7 $354.8 $(8.1) $0.0
Income available for common shareholders 77.6 77.6 – – – 77.6 – –
Other comprehensive income – cash flow
hedge (net of tax of $1.8) (2.7) (2.7) – – – – – (2.7)
Comprehensive income $74.9 – – – – – – –
Issuance of common stock – 152.3 – 4.6 147.7 – – –
Dividends on common stock – (58.8) – – – (58.8) – –
Other – (0.6) (1.0) – – – 0.4 –
Balance at December 31, 2001 $ – $715.9 $(4.2) $31.5 $325.4 $373.6 $(7.7) $(2.7)
Income available for common shareholders 109.4 109.4 – – – 109.4 – –
Other comprehensive income – cash flow
hedge (net of tax of $3.1) (4.6) (4.6) – – – – – (4.6)
Other comprehensive income – minimum
pension liability (net of tax of $1.8) (2.7) (2.7) – – – – – (2.7)
Comprehensive income $102.1 – – – – – – –
Issuance of common stock – 28.3 – 0.5 21.7 – 6.1 –
Purchase of common stock – (1.3) (1.3) – – – – –
Dividends on common stock – (67.1) – – – (67.1) – –
Other – 4.9 0.1 – 4.7 – 0.1 –
Balance at December 31, 2002 $ – $782.8 $(5.4) $32.0 $351.8 $415.9 $(1.5) $(10.0)
Income available for common shareholders 94.7 94.7 – – – 94.7 – –
Other comprehensive income – cash flow
hedge (net of tax of $4.8) 7.2 7.2 – – – – – 7.2
Other comprehensive income – minimum
pension liability (net of tax of $8.2) (12.3) (12.3) – – – – – (12.3)
Other comprehensive income –
currency translation 0.1 0.1 – – – – – 0.1
Comprehensive income $89.7 – – – – – – –
Issuance of common stock – 197.7 – 4.8 191.8 – 1.1 –
Purchase of common stock – (1.0) (1.0) – – – – –
Dividends on common stock – (71.8) – – – (71.8) – –
Other – 5.8 (0.1) – 5.9 – – –
Balance at December 31, 2003 – $1,003.2 $(6.5) $36.8 $549.5 $438.8 $(0.4) $(15.0)
The accompanying notes to WPS Resources Corporation’s
consolidated financial statements are an integral part of these statements.
W PS R E S O U R C E S CO R P O R ATI O N 49

Consolidated Statements of Cash Flows
Year Ended December 31 (Millions) 2003 2002 2001
Operating Activities
Net income before preferred stock dividends of subsidiary $ 97.8 $112.5 $ 80.7
Adjustments to reconcile net income to net cash provided by operating activities
Discontinued operations, net of tax 16.0 6.0 6.9
Depreciation and decommissioning 138.4 94.8 84.1
Amortization of nuclear fuel and other 42.4 46.5 11.1
Unrealized gain on investments (38.7) (1.7) (8.1)
Deferred income taxes and investment tax credit (0.4) 0.7 (33.0)
Unrealized losses on nonregulated energy contracts 10.4 5.3 14.4
Gain on sales of partial interest in synthetic fuel operation (7.6) (38.0) (2.2)
Gain on sale of property, plant, and equipment (7.1) (0.8) (14.9)
Cumulative effect of change in accounting principles, net of tax (3.2) – –
Other (13.3) (9.6) (10.7)
Changes in working capital, net of businesses acquired
Receivables, net (196.1) (99.7) 84.0
Inventories (79.9) 17.8 (42.1)
Other current assets (29.6) (6.2) 1.1
Accounts payable 102.8 59.1 (35.7)
Other current liabilities 30.5 1.8 8.5
Net cash operating activities 62.4 188.5 144.1
Investing Activities
Capital expenditures (176.2) (210.3) (244.3)
Sale of property, plant, and equipment 31.4 7.1 58.8
Purchase of equity investments and other acquisitions (102.7) (72.3) –
Return of capital from equity investment 0.2 0.4 42.4
Dividends received from equity investment 7.8 7.1 3.5
Decommissioning funding (3.0) (2.6) (2.6)
Other (1.5) 5.2 7.4
Net cash investing activities (244.0) (265.4) (134.8)
Financing Activities
Short-term debt – net 14.7 3.9 (98.5)
Issuance of long-term debt 125.0 250.3 180.8
Repayment of long-term debt and capital lease (87.7) (129.6) (64.7)
Payment of dividends
Preferred stock (3.1) (3.1) (3.1)
Common stock (71.8) (67.1) (58.8)
Issuance of common stock 197.7 28.3 96.4
Purchase of common stock (1.0) (1.3) (1.1)
Redemption of obligations acquired in purchase business combination – – (17.9)
Other 24.8 11.7 0.5
Net cash financing activities 198.6 93.1 33.6
Change in cash and cash equivalents – continuing operations 17.0 16.2 42.9
Change in cash and cash equivalents – discontinued operations (9.6) (16.8) (11.8)
Change in cash and cash equivalents 7.4 (0.6) 31.1
Cash and cash equivalents at beginning of year 43.3 43.9 12.8
Cash and cash equivalents at end of year $ 50.7 $ 43.3 $ 43.9
The accompanying notes to WPS Resources Corporation’s
consolidated financial statements are an integral part of these statements.
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Notes to Consolidated Financial Statements
Education is clearly valued in our organization. Upper
Peninsula Power encountered a shortage of trained electrical
line technicians, so when an instructor at “Line School”
unexpectedly dropped out, endangering the course, Jerry
Le Page, Customer Service Manager, volunteered to help.
He took a leave of absence to teach local people electrical
line technicians’ skills. He is teaching the Electrical Line
Technician Program at the Midwest Skills Development
Center in Michigan, and Upper Peninsula Power supports
this endeavor by maintaining Jerry’s benefit coverage.
NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF OPERATIONS—WPS Resources Corporation is a States of America. We make estimates and assumptions that affect reported
holding company. Our wholly owned subsidiary, Wisconsin Public Service amounts. These estimates and assumptions include assets, liabilities, the
Corporation, is an electric and gas utility. Wisconsin Public Service supplies disclosure of contingent assets and liabilities at the date of the financial
and distributes electric power and natural gas in its franchised service statements, and the reported amounts of revenues and expenses during
territory in northeastern Wisconsin and an adjacent portion of the Upper the reporting period. Actual results may differ from those estimates.
Peninsula of Michigan. Our other wholly owned utility subsidiary, Upper
(D) CASH AND CASH EQUIVALENTS—We consider short-term
Peninsula Power Company, is an electric utility. Upper Peninsula Power
investments with an original maturity of three months or less to be
supplies and distributes electric energy to a portion of the Upper Peninsula
cash equivalents.
of Michigan. Another wholly owned subsidiary, WPS Resources Capital
Corporation, is a holding company for our nonregulated businesses, Cash paid for taxes during 2003, 2002, and 2001 was $21.9 million,
WPS Energy Services, Inc. and WPS Power Development, Inc. WPS Energy $34.6 million, and $34.0 million, respectively. During 2003, 2002,
Services is a diversified energy supply and services company. WPS Power and 2001, cash paid for interest totaled $57.9 million, $52.3 million,
Development is an electric generation company. and $52.6 million, respectively.
The term “utility” refers to the regulated activities of Wisconsin Public Non-cash transactions were as follows:
Service and Upper Peninsula Power, while the term “nonutility” refers
to the activities of Wisconsin Public Service and Upper Peninsula Power, (Millions) 2003 2002 2001
which are not regulated. The term “nonregulated” refers to activities Restricted cash $(1.0) $(17.8) $21.3
other than those of Wisconsin Public Service and Upper Peninsula Power. Conversion of indebtedness to
equity in Quest Energy, LLC – 2.4 –
(B) CONSOLIDATION BASIS OF PRESENTATION—The Consolidated Liabilities assumed in connection
Financial Statements include the accounts of WPS Resources Corporation with CH Resources acquisition – 0.9 –
and all majority owned subsidiaries, after eliminating significant Minimum pension liability equity
intercompany transactions and balances. If a minority owner’s equity is adjustment (12.3) (2.7) –
reduced to zero, it is our policy to record 100% of the subsidiary’s losses Exchange of transmission assets
until the minority owner makes capital contributions or commitments for equity interest in American
Transmission Company 5.9 – 93.1
to fund its share of the operating costs. The cost method of accounting
Exchange of common stock due
is used for investments where WPS Resources owns less than 20% of to merger with Wisconsin Fuel
the voting stock of the company, unless other evidence indicates we and Light – – 54.8
have significant influence over the operating and financial policies of the
investee. Investments in businesses not controlled by WPS Resources (E) REVENUE AND CUSTOMER RECEIVABLES—Revenues are recognized
Corporation, but over which we have significant influence over the on the accrual basis and include estimated amounts for electric and natural
operating and financial policies of the investee, are accounted for using gas services rendered but not billed. Approximately 5.7% of WPS Resources’
the equity method. For additional information on our equity method total revenue is from companies in the paper products industry.
investments see Note 10 – Investments in Affiliates, at Equity Method.
Wisconsin Public Service and Upper Peninsula Power use automatic
In the fourth quarter of 2003, certain assets and liabilities of WPS Power fuel and purchased power adjustment clauses for the Federal Energy
Development’s Sunbury generation plant were reclassified as assets held Regulatory Commission wholesale electric and the Michigan Public
for sale for all periods presented. The operating results for this business Service Commission retail electric portions of the business. At Upper
have been separately classified and reported as discontinued operations Peninsula Power most wholesale electric contracts are special contracts
in the consolidated financial statements for all periods presented. Refer and have no automatic fuel and purchased power adjustment clauses.
to Note 4 – Assets Held for Sale for more information. The Wisconsin retail electric portion of Wisconsin Public Service’s
business uses a “cost variance range” approach, based on a specific
(C) USE OF ESTIMATES—We prepare our financial statements in
estimated fuel and purchased power cost for the forecast year. If
conformity with accounting principles generally accepted in the United
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Notes to Consolidated Financial Statements
Wisconsin Public Service’s actual fuel and purchased power costs fall WPS Energy Services accrues revenues in the month that energy is delivered
outside this range, the Public Service Commission of Wisconsin can and/or services are rendered. With the January 1, 2003, adoption of Emerging
authorize an adjustment to future rates. Decreases to rates can be Issues Task Force Issue No. 02-03, “Issues Involved in Accounting for
implemented without a hearing, unless requested by Wisconsin Public Derivative Contracts Held for Trading Purposes and Contracts Involved
Service, Commission staff or interveners, while increases to rates would in Energy Trading and Risk Management Activities,” revenues related to
generally be subject to a hearing. For more information on current derivative instruments classified as trading are reported net of related cost
regulatory actions relating to the fuel and purchased power adjustment of sales for all periods presented. Therefore, previously reported revenues for
clauses see Note 23 – Regulatory Environment. derivatives classified as trading in 2002 and 2001 have been reclassified to be
shown net of cost of fuel, natural gas, and purchased power, while most 2003
The Public Service Commission of Wisconsin approved a modified
revenues continue to be reported on a gross basis – see Note 1(T) – Cumulative
one-for-one gas cost recovery plan for Wisconsin Public Service commencing
Effect of Change in Accounting Principles for more information. Neither
in January 1999. This plan allows Wisconsin Public Service to pass changes
margins nor income available for common shareholders were impacted by
in the cost of natural gas purchased from its suppliers on to system natural
the reclassification of revenue upon adoption of Issue 02-03.
gas customers, subject to regulatory review. The regulatory review process
allows the Commission to review the changes for reasonableness. In accordance with the requirements of Emerging Issues Task Force Issue
No. 02-03, WPS Energy Services’ gross physical volumes of natural gas
The Michigan Public Service Commission has approved one-for-one
and electricity delivered in 2003, 2002, and 2001 are reported in the
recovery of prudently incurred gas costs for Wisconsin Public Service,
following tables:
subject to regulatory review. The Michigan Public Service Commission
has also approved a gas cost recovery factor adjustment mechanism WPS Energy Services’
for Wisconsin Public Service for the period November 2003 through Gas Results 2003 2002 2001
October 2004. This adjustment mechanism allows Wisconsin Public
Wholesale sales volumes
Service to upwardly adjust the gas rates charged to customers in in billion cubic feet * 252.4 233.8 242.8
Michigan based on upward changes to the New York Mercantile Exchange
Retail sales volumes
natural gas futures price of gas without further Commission action. in billion cubic feet * 240.6 135.7 104.5
Billings to Upper Peninsula Power’s customers under the Michigan Public * Represents gross physical volumes.
Service Commission’s jurisdiction include base rate charges and a power
WPS Energy Services’
supply cost recovery factor. Upper Peninsula Power receives Michigan Electric Results (Millions) 2003 2002 2001
Public Service Commission approval each year to recover projected
power supply costs by establishment of power supply cost recovery Wholesale sales volumes
in kilowatt-hours * 2,768.0 4,250.0 1,696.6
factors. Annually, the Michigan Public Service Commission reconciles
these factors to actual costs and permits 100% recovery of allowed Retail sales volumes
in kilowatt-hours * 6,435.3 2,703.6 1,944.7
power supply costs. Upper Peninsula Power recognizes any over or
* Represents gross physical volumes.
under recovery currently in its revenues and the payable or receivable
WPS Energy Services calculates the reserve for potential uncollectible
is recognized on the balance sheet until settlement. The deferrals are
customer receivable balances by applying an estimated bad debt experience
relieved with additional billings or refunds. At December 31, 2003,
rate to each past due aging category and reserving for 100% of specific
Upper Peninsula Power has also recorded regulatory assets related to
customer receivable balances deemed to be uncollectible. The basis for
costs associated with the flooding on the Dead River for which the
calculating the reserve for receivables from wholesale counterparties
Michigan Public Service Commission has authorized deferral.
considers any netting agreements, collateral, or guaranties in place.
Wisconsin Public Service and Upper Peninsula Power are required to
(F) INVENTORIES—Inventories consist of natural gas in storage and fossil
provide service and grant credit to customers within their service territories.
fuels, including coal. We value all fossil fuels using average cost. Average
The two companies continually review their customers’ credit worthiness
cost is also used to value natural gas in storage for our regulated segments.
and obtain deposits or refund deposits accordingly. Both utilities are
Natural gas in storage for our nonregulated segments is valued at the lower
precluded from discontinuing service to residential customers during
of cost or market unless hedged pursuant to a fair value hedge. Through
winter moratorium months. Our regulated segments calculate a reserve for
December 2002, natural gas in storage for our nonregulated segments was
potential uncollectible customer receivables using a four-year average of
marked to the current spot price under fair value accounting rules. To
bad debts net of recoveries as a percentage of total accounts receivable.
comply with new accounting requirements resulting from the rescission of
The historical percentage is applied to the current year-end accounts
Emerging Issues Task Force Issue No. 98-10, “Accounting for Contracts
receivable balance to determine the reserve balance required.
Involved in Energy Trading and Risk Management Activities,” we adopted
At WPS Power Development, electric power revenues related to the inventory valuation method described above for our nonregulated
fixed-price contracts are recognized at the lower of amounts billable under natural gas inventories effective January 1, 2003.
the contract or an amount equal to the volume of the capacity made
(G) RISK MANAGEMENT ACTIVITIES—As part of our regular
available or the energy delivered during the period multiplied by the
operations, WPS Resources enters into contracts, including options,
estimated average revenue per kilowatt-hour per the terms of the
swaps, futures, forwards, and other contractual commitments, to manage
contract. Under floating-price contracts, electric power revenues are
market risks such as changes in commodity prices, interest rates, and
recognized when capacity is provided or energy is delivered.
foreign currency exchange rates.
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WPS Resources evaluates its derivative contracts in accordance with gains and losses did not have a significant impact on our financial
Statement of Financial Accounting Standards No. 133, “Accounting statements and neither margins, income available for common
for Derivative Instruments and Hedging Activities,” as amended and shareholders, nor cash flows were impacted by the change.
interpreted. Statement No. 133 establishes accounting and financial
(H) PROPERTY, PLANT, AND EQUIPMENT—Utility plant is stated at the
reporting standards for derivative instruments and requires, in part,
original cost of construction including an allowance for funds used during
that we recognize certain derivative instruments on the balance sheet
construction. The cost of renewals and betterments of units of property (as
as assets or liabilities at their fair value. Subsequent changes in fair value
distinguished from minor items of property) is capitalized as an addition to
of the derivatives are recorded currently in earnings unless certain hedge
the utility plant accounts. Except for land, no gain or loss is recognized in
accounting criteria are met. If the derivatives qualify for regulatory deferral
connection with ordinary retirements of utility property units. Maintenance,
subject to the provisions of Statement No. 71, “Accounting for the
repair, replacement, and renewal costs associated with items not qualifying
Effects of Certain Types of Regulation,” the derivatives are marked to fair
as units of property are considered operating expenses. The utility charges
value pursuant to Statement No. 133 and are offset with a corresponding
the cost of units of property retired, sold, or otherwise disposed of, less
regulatory asset or liability. Prior to the adoption of Emerging Issues
salvage, to the accumulated provision for depreciation.
Task Force Issue No. 02-03, “Issues Involved in Accounting for Derivative
Contracts Held for Trading Purposes and Contracts Involved in Energy We record straight-line depreciation expense over the estimated useful life
Trading and Risk Management Activities,” effective January 1, 2003, of utility property and include amounts for estimated removal and salvage.
WPS Resources accounted for contracts in accordance with Issue The Public Service Commission of Wisconsin approved depreciation rates
No. 98-10, “Accounting for Contracts Involved in Energy Trading and for Wisconsin Public Service effective January 1, 1999. On March 1, 2004,
Risk Management Activities.” See Note 1(T) – Cumulative Effect of Wisconsin Public Service filed a request for new depreciation rates to be
Change in Accounting Principles for more information concerning the effective January 1, 2005. Depreciation rates for Upper Peninsula Power
transition from Issue 98-10 to Statement No. 133. were approved by the Michigan Public Service Commission and are
effective January 1, 2002, through December 31, 2006.
Effective July 1, 2003, WPS Resources adopted Statement of Financial
Accounting Standards No. 149, “Amendment of Statement 133 on Depreciation for the Kewaunee nuclear power plant is being accrued based
Derivative Instruments and Hedging Activities.” Statement No. 149 on a Public Service Commission of Wisconsin order that became effective
codifies and clarifies financial accounting and reporting for derivative on January 1, 2001. The order included a change in the depreciation
instruments and hedging activities under Statement No. 133, primarily methodology for the Kewaunee nuclear power plant after the steam
in connection with decisions made by the Derivatives Implementation generators were replaced. The cost of the new steam generators that
Group and for implementation issues raised in the application of went into service in December 2001 will be recovered over an 8-1/2 year
Statement No. 133. Statement No. 149 is effective for contracts entered period using the sum-of-years-digits method of depreciation. Also under
into or modified after June 30, 2003. The adoption of Statement this order, the unrecovered plant investment at January 1, 2001, and
No. 149 did not have a significant impact on WPS Resources for 2003. future additions will be recovered over a period ending 8-1/2 years after
the installation of the steam generators using a straight-line remaining
WPS Resources adopted Emerging Issues Task Force Issue 03-11,
life depreciation methodology.
“Reporting Realized Gains and Losses on Derivative Instruments that
are Subject to FASB Statement No. 133 and Not ‘Held for Trading Depreciation expense also includes accruals for nuclear decommissioning.
Purposes’ as Defined in Issue No. 02-03,” which resulted in recording These accruals are not included in the annual composite rates shown
revenues net of cost of fuel, gas, and purchased power for energy-related below. An explanation of this item is included in Note 8 – Nuclear
transactions that settle financially and for which the commodity does not Plant Operation.
physically transfer for arrangements entered into after October 1, 2003.
Had we applied the provisions of Issue 03-11 to arrangements entered
Annual Utility Composite
into prior to October 1, 2003, previously reported nonregulated revenue Depreciation Rates 2003 2002 2001
would have decreased $62.9 million for the nine months ending
September 30, 2003, with a corresponding $62.9 million decrease to Electric 3.63% 3.66% 3.23%
Gas 3.63% 3.59% 3.37%
nonregulated cost of fuel, gas, and purchased power. Previously reported
wholesale natural gas sales volumes for the nine months ending
Nonutility property interest capitalization takes place during construction,
September 30, 2003, would have decreased 10.8 billion cubic feet.
and gain and loss recognition occurs in connection with retirements.
Application of the provisions of Issue 03-11 to arrangements entered
Nonutility property is depreciated using straight-line depreciation.
into prior to October 1, 2003, would not have impacted the 2002 and
Asset lives range from 3 to 20 years.
2001 financial statements or reported sales volumes. Neither margins,
income, nor cash flows were impacted by the adoption of Issue 03-11. Nonregulated plant is stated at the original construction cost, which
includes capitalized interest for those assets, or estimated fair value at
In accordance with views recently expressed by the Securities and
the time of acquisition pursuant to a business combination. The costs of
Exchange Commission staff, WPS Resources has reclassified mark-
renewals, betterments, and major overhauls are capitalized as an addition
to-market gains and losses on derivative instruments not qualifying
to plant. The gains or losses associated with ordinary retirements are
for hedge accounting as a component of revenues for all periods
recorded in the period of retirement. Maintenance, repair, and minor
presented. The retroactive reclassification of the mark-to-market
replacement costs are expensed as incurred.
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Notes to Consolidated Financial Statements
Most of the nonregulated subsidiaries compute depreciation using (J) ASSET IMPAIRMENT—We review the recoverability of long-lived
the straight-line method over the following estimated useful lives: tangible and intangible assets, excluding goodwill and regulatory assets,
Structures and improvements 15 to 40 years using Statement of Financial Accounting Standards No. 144, “Accounting
Office and plant equipment 5 to 35 years for the Impairment and Disposal of Long-Lived Assets.” Statement No. 144
Office furniture and fixtures 3 to 10 years requires review of assets when circumstances indicate that the carrying
Vehicles 5 years amount of the asset may not be recoverable. This evaluation is based
Computer equipment 3 years on various analyses, including undiscounted cash flow projections. The
Leasehold improvements Shorter of: life of the lease carrying amount is not recoverable if it exceeds the undiscounted sum
or life of the asset of cash flows expected to result from the use and eventual disposition of
The Combined Locks Energy Center, however, is using the units of the asset. If the carrying value is not recoverable, the impairment loss is
production depreciation method for selected pieces of equipment having measured as the excess of the asset’s carrying value over its fair value.
defined lives stated in terms of hours of production. If events or circumstances indicate the carrying value of investments
WPS Resources capitalizes certain costs related to software developed or accounted for under the equity method of accounting may not be
obtained for internal use and amortizes those costs to operating expense recoverable, potential impairment is assessed by comparing the future
over the estimated useful life of the related software, which is usually anticipated cash flows from these investments to their carrying values.
three to seven years. The estimated fair value less cost to sell for assets held for sale are
compared each reporting period to their carrying values. Impairment
(I) CAPITALIZED INTEREST AND ALLOWANCE FOR FUNDS USED charges are recorded for equity method investments and assets held for
DURING CONSTRUCTION—Our nonregulated subsidiaries capitalize sale if the carrying value of such assets exceeds the future anticipated
interest for construction projects, while our utilities use an allowance cash flows or the estimated fair value less cost to sell, respectively.
for funds used during construction calculation, which includes both an
interest and an equity component as required by regulatory accounting. (K) REGULATORY ASSETS AND LIABILITIES—Wisconsin Public Service
and Upper Peninsula Power are subject to the provisions of Statement of
Approximately 50% of Wisconsin Public Service’s retail jurisdictional Financial Accounting Standards No. 71, “Accounting for the Effects of
construction work-in-progress expenditures are subject to allowance for Certain Types of Regulation.” Regulatory assets represent probable
funds used during construction, except specific Public Service Commission future revenue associated with certain incurred costs. Revenue will be
of Wisconsin approved projects that could have a larger percent of recovered from customers through the ratemaking process. Regulatory
expenditures subject to allowance for funds used during construction. liabilities represent amounts that are refundable in future customer rates.
For 2003, Wisconsin Public Service’s allowance for funds used during Based on a current evaluation of the various factors and conditions that
construction retail rate was 9.61%. are expected to impact future cost recovery, we believe that future
Wisconsin Public Service’s construction work-in-progress debt and equity recovery of our regulatory assets is probable.
percentages for wholesale jurisdictional electric allowance for funds used (L) GOODWILL AND OTHER INTANGIBLE ASSETS—On January 1, 2002,
during construction are specified under a formula in the Federal Energy WPS Resources adopted Statement of Financial Accounting Standards
Regulatory Commission’s Uniform System of Accounts. For 2003, the No. 142, “Goodwill and Other Intangible Assets,” and amortization of
allowance for funds used during construction wholesale rate was 4.03%. goodwill was discontinued. There was no impairment of goodwill upon
Upper Peninsula Power is subject to one allowance for funds used during adoption of Statement No. 142. WPS Resources has elected to perform its
construction rate. That rate is specified in a formula in the Federal Energy annual impairment test during the second quarter of each year, updated
Regulatory Commission’s Uniform System of Accounts, but limited by whenever events or changes in circumstances indicate that goodwill might
the Michigan Public Service Commission’s allowed rate of return. For be impaired. Based upon the results of impairment testing performed in
2003, the allowance for funds used during construction rate was 2.5%. 2003, no impairment of goodwill was noted.
Historically, there have been few calculations of allowance for funds used Other intangible assets with definite lives, consisting primarily of emission
during construction due to the small dollar amounts or short construction credits and customer related intangible assets, are amortized over periods
periods of Upper Peninsula Power’s construction projects. from 1 to 30 years. For more information on WPS Resources’ intangible
Wisconsin Public Service’s allowance for equity funds used during assets, see Note 11 – Goodwill and Other Intangible Assets.
construction for 2003, 2002, and 2001 were $2.4 million, $3.0 million, (M) RETIREMENT OF DEBT—Premiums, discounts, and expenses
and $1.9 million, respectively. Wisconsin Public Service’s allowance for incurred with the issuance of outstanding long-term debt are amortized
borrowed funds used during construction for 2003, 2002, and 2001 were over the terms of the debt issues. Any call premiums or unamortized
$1.0 million, $1.2 million, and $2.1 million, respectively. Upper Peninsula expenses associated with refinancing higher-cost debt obligations used
Power did not record allowance for funds used during construction for to finance regulated assets and operations are amortized consistent
2003, 2002, or 2001. with regulatory treatment of those items, where appropriate.
Our nonregulated subsidiaries calculate capitalized interest on long- (N) RESEARCH AND DEVELOPMENT—The only member of
term construction projects for periods where financing is provided by WPS Resources’ consolidated entity that incurs significant research
WPS Resources through interim debt. The interest rate capitalized is and development costs is Wisconsin Public Service. Electric research
based upon the monthly short-term borrowing rate WPS Resources and development expenditures for Wisconsin Public Service totaled
incurs for such funds. $0.6 million for 2003, $0.3 million for 2002, and $1.1 million for 2001.
54 W PS R E S O U R C E S CO R P O R ATI O N

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(O) ASSET RETIREMENT OBLIGATIONS—Effective January 1, 2003, At December 31, 2003, Wisconsin Public Service had an outstanding
WPS Resources adopted Statement of Financial Accounting Standards No.143, guarantee to indemnify a third-party for certain exposures related to
“Accounting for Asset Retirement Obligations.” Under the new accounting the construction of utility assets. In the event that the construction
standard, WPS Resources recognizes, at fair value, legal obligations associated project is not completed, Wisconsin Public Service agreed to reimburse
with the retirement of tangible long-lived assets that result from the the guaranteed party for certain unrecovered costs. At December 31, 2003,
acquisition, construction or development and/or normal operation of the the guarantee carries a maximum exposure of $5.5 million. A liability for
asset. The associated retirement costs are capitalized as part of the related the fair value of this obligation was not recognized in the Consolidated
long-lived asset and depreciated over the useful life of the asset. For the utility Balance Sheets of Wisconsin Public Service, because the guarantee was
segments of WPS Resources, we believe it is probable that any differences issued prior to the effective date for initial measurement and recognition
between expenses under Statement No.143 and expenses currently recovered as defined by Interpretation No. 45.
through customer rates will be recoverable in future customer rates.
(S) STOCK OPTIONS—At December 31, 2003, WPS Resources had three
Accordingly, the adoption of this statement had no impact on the utility
stock option plans, which are described more fully in Note 22 – Stock
segment’s income as the effects were offset by the establishment of regulatory
Option Plans. We account for these plans under the recognition and
assets or liabilities pursuant to Statement No. 71. Refer to Note 16 – Asset
measurement principles of Accounting Principles Board Opinion No. 25,
Retirement Obligations for additional information on Statement No. 143.
“Accounting for Stock Issued to Employees,” and related interpretations.
(P) INCOME TAXES—We account for income taxes using the liability No compensation cost for stock options is reflected in income available
method as prescribed by Statement of Financial Accounting Standards for common shareholders, as all options granted under those plans had
No. 109, “Accounting for Income Taxes.” Under this method, deferred income an exercise price equal to the market value of the underlying common
taxes have been recorded using currently enacted tax rates for the differences stock on the date of grant.
between the tax basis of assets and liabilities and the basis reported in the
The following table illustrates the effect on income available for common
financial statements. Due to the effects of regulation on Wisconsin Public
shareholders and earnings per share if we had applied the fair value
Service and Upper Peninsula Power, certain adjustments made to deferred
recognition provisions of FASB Statements No. 123, “Accounting for
income taxes are, in turn, recorded as regulatory assets or liabilities.
Stock Based Compensation,” to employee stock options.
Investment tax credits, which have been used to reduce our federal income
taxes payable, have been deferred for financial reporting purposes. These
deferred investment tax credits are being amortized over the useful lives (Millions, except per share amounts) 2003 2002 2001
of the property to which they are related. Income available for
common shareholders
WPS Resources is an indirect part owner in a facility that produces As reported $94.7 $109.4 $77.6
synthetic fuel from coal, as defined in Section 29 of the Internal Revenue Deduct: Total stock option employee
Code. The production and sale of the synthetic fuel from this facility compensation expense determined
qualifies for tax credits under Section 29 if certain requirements are under fair value method for all awards,
net of related tax effects (0.5) (0.5) (0.3)
satisfied. Section 29 tax credits are currently scheduled to expire at the
Pro forma $94.2 $108.9 $77.3
end of 2007. Tax credits that are not utilized to reduce tax expense as a
result of alternative minimum tax rules relating to United States federal Basic earnings per
common share
income taxes are carried forward as alternative minimum tax credits to
As reported $2.87 $3.45 $2.75
reduce current tax expense in future years. Under current federal law,
Pro forma 2.85 3.44 2.74
alternative minimum tax credits do not expire.
Diluted earnings per
WPS Resources files a consolidated United States income tax return that common share
includes domestic subsidiaries in which its ownership is 80 percent or As reported $2.85 $3.42 $2.74
more. WPS Resources and its consolidated subsidiaries are parties to a tax Pro forma 2.84 3.40 2.73
allocation arrangement under which each entity determines its income
tax provision on a stand alone basis, after which effects of federal (T) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
consolidation are accounted for. PRINCIPLES—WPS Energy Services had been applying the accounting
standards of Issue 98-10, “Accounting for Contracts Involved in Energy
(Q) EXCISE TAXES—WPS Resources presents revenue net of pass-through Trading and Risk Management Activities,” from the first quarter of
taxes on the Consolidated Statements of Income. 2000 until this standard was rescinded by Issue 02-03 in October 2002.
(R) GUARANTEES—Effective January 1, 2003, WPS Resources adopted the WPS Energy Services was defined as a trading company under Issue 98-10
provisions of Financial Accounting Standards Board Interpretation No. 45, and was required to mark all of its energy related contracts to market.
“Guarantor’s Accounting and Disclosure Requirements for Guarantees On October 25, 2002, the Emerging Issues Task Force rescinded Issue 98-10,
Including Indirect Guarantees of Indebtedness of Others.” Interpretation thus precluding mark-to-market accounting for energy trading contracts
No. 45 elaborates on the disclosures to be made by a guarantor in its entered into after that date that are not derivatives and requiring a
interim and annual financial statements about its obligations under certain cumulative change in accounting principle to be recorded effective
guarantees that it has issued. Interpretation No. 45 also requires that the January 1, 2003, for all nonderivative contracts entered into on or prior
guarantor recognize, at the inception of the guarantee, a liability for to October 25, 2002. On January 1, 2003, WPS Resources recorded an
the fair value of the obligation undertaken in issuing the guarantee. after-tax cumulative effect of a change in accounting principle of
W PS R E S O U R C E S CO R P O R ATI O N 55

Notes to Consolidated Financial Statements
$3.5 million (primarily related to the operations of WPS Energy Services) from its requirements. The effective implementation date of Interpretation
to increase income available for common shareholders as a result of No. 46 was also modified by Interpretation No. 46R. The application of
removing from its balance sheet the mark-to-market effects of those Interpretation No. 46R was required for financial statements of public
contracts entered into on or prior to October 25, 2002, that do not meet entities that have interests in special-purpose entities for periods ending
the definition of a derivative under Statement No. 133. The cumulative after December 15, 2003. WPS Resources identified WPSR Capital Trust I
effect of adopting this new accounting standard is expected to reverse as a special purpose entity that is within the scope of Interpretation
upon the settlement of the contracts impacted by the standard. Most of No. 46R. Refer to Note 15 – Company-Obligated Mandatorily Redeemable
this reversal is expected to occur in 2004. The required change in accounting Trust Preferred Securities of Preferred Stock Trust for further discussion
had no impact on the underlying economics or cash flows of the contracts. of the impacts of implementing this portion of Interpretation No. 46R
on the financial statement of WPS Resources. For all other types of
In addition, the adoption of Statement No. 143 at WPS Power Development
variable interest entities, the application of Interpretation No. 46R will
resulted in a $0.3 million negative after-tax cumulative effect of change
be required in the first quarter of 2004.
in accounting principle related to recording a liability for the closure of
an ash basin at the Sunbury generating plant. WPS Resources has not identified any material variable interest entities
created, or interests in variable entities obtained, after January 31, 2003,
(U) RECLASSIFICATIONS—We reclassified certain prior year financial
that require consolidation or disclosure under the Financial Accounting
statement amounts to conform to the current year presentation.
Standard Board’s Interpretation No. 46R and continues to assess the
(V) NEW ACCOUNTING PRONOUNCEMENTS—In January 2003, existence of any interests in variable interest entities, not classified as special
the Financial Accounting Standards Board issued Interpretation No. 46, purpose entities, created on or prior to January 31, 2003. WPS Resources
“Consolidation of Variable Interest Entities, an Interpretation of currently anticipates that we will disclose information about a variable
Accounting Research Bulletin No. 51,” in order to improve financial interest entity upon implementation of Interpretation No. 46R in the first
reporting by companies involved with variable interest entities. quarter of 2004. Through an affiliate of WPS Power Development, Inc.,
Interpretation No. 46 requires certain variable interest entities to be WPS Resources owns a partial interest in a synthetic fuel production
consolidated by the primary beneficiary of the entity if the equity facility located in Kentucky and receives tax credits pursuant to Section 29
investors in the entity do not have the characteristics of a controlling of the Internal Revenue Code based on sales to unaffiliated third-party
financial interest or do not have sufficient equity at risk for the entity purchasers of synthetic fuel produced from coal. At December 31, 2003,
to finance its activities without additional subordinated financial support WPS Resources had a 23% ownership interest in the synthetic fuel facility.
from other parties. The primary beneficiary is the party that absorbs WPS Resources’ maximum exposure to loss as a result of our involvement
a majority of the expected losses and/or receives the majority of the with this potential variable interest entity is limited to our investment in
expected residual returns of the variable interest entity’s activities. the entity, which is not significant at December 31, 2003. Currently, we do
On December 24, 2003, the Financial Accounting Standards Board issued not believe that WPS Resources is the primary beneficiary of this entity
a revision to Interpretation No. 46 (“46R”) in order to clarify some of and do not anticipate consolidation of the synthetic fuel facility upon
the provisions of Interpretation No. 46 and to exempt certain entities adoption of Interpretation No. 46R in the first quarter of 2004.
The utility segments of WPS Resources recognize removal costs for utility
assets. Historically these removal costs have been reflected as a component
of depreciation expense and accumulated depreciation in accordance with
regulatory treatment. The staff of the Securities and Exchange Commission
has recently expressed their views on the balance sheet presentation of
these removal costs for the utility industry and has required that the
amounts be reclassified from accumulated depreciation to a liability for
all years presented. As a result, WPS Resources reclassified $463.3 million
from accumulated depreciation to nuclear decommissioning and other
costs of removal at December 31, 2002. Of the total amount reclassified,
Wisconsin Public Service recorded $451.6 million. Upon adoption of
Financial Accounting Standards No. 143, “Accounting for Asset Retirement
Obligations” on January 1, 2003, costs of removal with associated legal
retirement obligations of $290.5 million were removed from nuclear
decommissioning and other costs of removal as these costs are now
Our commitment to being a world-class energy provider includes
environmental responsibility. Connie Lawniczak (left) manages our
environmental programs and environmental health and remediation.
Shirley Scharff (right) is one of our Environmental Consultants and
also manages our lab and chemical procedures.
56 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
accounted for as asset retirement obligations. Refer to Note 16 – Asset not have an associated legal obligation from nuclear decommissioning
Retirement Obligations for more information on costs of removal with and other costs of removal to regulatory liability pursuant to Statement
associated legal obligations. At December 31, 2003, WPS Resources No. 71. Wisconsin Public Service reclassified $167.9 million of costs of
reclassified $180.0 million of costs of removal that were determined to removal that were determined to not have an associated legal obligation.
NOTE 2—FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
2003 2002
to estimate such value:
Carrying Fair Carrying Fair
Cash, Short-Term Investments, Energy Conservation Loans, Notes Payable, (Millions) Amount Value Amount Value
and Outstanding Commercial Paper: The carrying amount approximates Cash and cash equivalents $ 50.7 $ 50.7 $ 43.3 $ 43.3
fair value due to the short maturity of those investments and obligations. Restricted cash 3.2 3.2 4.2 4.2
Energy conservation loans 1.9 1.9 2.2 2.2
Nuclear Decommissioning Trusts: The value of nuclear decommissioning
Nuclear decommissioning trusts 332.3 332.3 290.5 290.5
trust investments is recorded at fair value, net of taxes payable on unrealized
Nuclear decommissioning trusts –
gains and losses, and represents the amount of assets available to other assets 22.5 22.5 13.0 13.0
accomplish decommissioning. The nonqualified trust investments Notes payable 10.0 10.0 13.8 13.8
designated to pay income taxes when unrealized gains become realized Commercial paper 28.0 28.0 16.0 16.0
are classified as nuclear decommissioning trusts – other assets.
Note payable to preferred
Long-Term Debt and Preferred Stock: The fair value of long-term stock trust 51.5 51.5 – –
debt and preferred stock are estimated based on the quoted market Trust preferred securities – – 50.0 51.1
price for the same or similar issues or on the current rates offered to Long-term debt 931.2 1,014.7 898.1 970.6
WPS Resources for debt of the same remaining maturity. Preferred stock 51.1 49.1 51.1 45.5
Risk management activities – net 12.9 12.9 (11.6) (11.6)
The estimated fair values of our financial instruments as of
December 31 were:
NOTE 3—RISK MANAGEMENT ACTIVITIES
UTILITY SEGMENT 2002, we recorded an asset from risk management activities
Wisconsin Public Service has entered into a limited number of natural of $25.5 million and a liability from risk management activities of
gas and electric purchase contracts with customers that are accounted for $23.2 million for those contracts entered into after October 25, 2002,
as derivatives. The Public Service Commission of Wisconsin approved that qualified as derivatives and were not designated as hedges.
recognizing a regulatory asset or liability for the fair value of derivative Commodity contracts entered into before October 25, 2002, were
amounts as a result of these contracts pursuant to Statement No. 71. accounted for as energy trading contracts under Issue 98-10 at
Thus, management believes any gains or losses resulting from the December 31, 2002. At December 31, 2002, WPS Energy Services
eventual settlement of these contracts will be collected from or refunded recorded an asset from risk management activities of $514.9 million
to customers. As of December 31, 2003, we have recorded an asset from and a liability from risk management activities of $516.4 million
risk management activities of $8.4 million related to these contracts. related to energy trading contracts accounted for under Issue 98-10.
We recorded an asset from risk management activities of $1.4 million
Our nonregulated segments also enter into derivative contracts that are
and a liability from risk management activities of $0.7 million related
designated as either fair value or cash flow hedges. Fair value hedges are
to these contracts at December 31, 2002.
used to mitigate the risk of changes in prices of natural gas held in
N O N R E G U L AT E D S E G M E N T S inventory and changes in fair value of foreign currency. The changes in the
Our nonregulated segments have also entered into contracts that are fair value of these hedges are recognized currently in earnings as are the
accounted for as derivatives under the provisions of Statement No. 133, changes in fair value of the hedged items. To the extent that the fair value
as amended. At December 31, 2003, those derivatives not designated hedge is fully effective, there is no impact on earnings. At December 31,
as hedges are primarily commodity contracts used to manage price 2003, the fair value of contracts designated as fair value hedges, excluding
risk associated with wholesale and retail natural gas purchase and sale foreign exchange contracts, are recorded as an asset from risk management
activities and electric energy contracts. Changes in the fair value of activities of $0.3 million and a liability from risk management activities of
the non-hedge derivatives are recognized currently in earnings. At $4.0 million. Fair value hedge ineffectiveness recorded in nonregulated cost
December 31, 2003, the fair value of these contracts is recorded as an of fuel, gas, and purchased power on the Consolidated Statement of
asset from risk management activities of $578.1 million and a liability Income was not significant during 2003. At December 31, 2002, those
from risk management activities of $582.1 million. At December 31, contracts designated as fair value hedges were not significant.
W PS R E S O U R C E S CO R P O R ATI O N 57

Notes to Consolidated Financial Statements
Forward foreign exchange contracts designated as fair value hedges the changes in the values of these contracts are included in other
are utilized to manage the risk associated with currency fluctuations comprehensive income, net of deferred taxes. Amounts recorded in other
on certain firm sales and purchase commitments denominated in comprehensive income related to these cash flow hedges will be recognized
Canadian dollars and certain Canadian dollar denominated asset and in earnings as the related contracts are settled or if the hedged transaction is
liability positions. The terms of our forward foreign exchange contracts discontinued. Through December 31, 2004, $6.3 million is expected to be
are consistent with the terms of the underlying transactions, generally recognized in earnings. The portion of these contracts that was determined
one year or less. Unrealized gains and losses resulting from the impact to be ineffective was not significant at December 31, 2003, and was recorded
of currency exchange rate movements on forward foreign exchange as a component of nonregulated cost of fuel, gas, and purchased power.
contracts designated to offset certain non-U.S. dollar denominated When testing for effectiveness, no portion of the derivative instruments
assets and liabilities are recognized in earnings and offset the foreign was excluded. At December 31, 2002, those commodity contracts
currency gains and losses on the underlying exposures being hedged. designated as cash flow hedges were not significant.
The contract amounts of forward foreign exchange contracts outstanding
The interest rate swap designated as a cash flow hedge is used to fix the
at December 31, 2003, are recorded as an asset from risk management
interest rate for the full term of a variable rate loan due in March 2018.
activities of $10.6 million and a liability from risk management activities
At December 31, 2003, we recorded a liability from risk management
of $4.3 million and were not significant at December 31, 2002. All of
activities of $10.1 million related to this swap. At December 31, 2002,
the foreign exchange contracts designated as fair value hedges were
we recorded a liability from risk management activities of $12.7 million
determined to be perfectly effective.
related to this swap. Because the swap was determined to be perfectly
Cash flow hedges consist of commodity contracts associated with our effective, the changes in the value of this contract are included in other
energy marketing activities and an interest rate swap. At December 31, comprehensive income, net of deferred taxes. Amounts recorded in other
2003, the fair value of commodity contracts designated as cash flow hedges comprehensive income related to this swap will be recognized as expense
is recorded as an asset from risk management activities of $25.0 million as the interest is paid. Through December 31, 2004, $2.2 million is
and a liability from risk management activities of $9.0 million. These expected to be expensed, assuming interest rates comparable to those
cash flow hedges extend through December 2005. The majority of the at December 31, 2003. We did not exclude any components of the
commodity contracts were determined to be perfectly effective; therefore, derivative instrument’s loss from the assessment of hedge effectiveness.
NOTE 4—ASSETS HELD FOR SALE
On October 24, 2003, WPS Power Development entered into a
definitive agreement to sell its Sunbury generation plant located in (Millions) 2003 2002
Pennsylvania. This facility currently sells power on a wholesale basis, Inventories $ 4.2 $ 7.8
and provides energy for a 200-megawatt around-the-clock outtake Other current assets 5.1 5.2
Property, plant, and equipment, net 71.5 70.7
contract that expires on December 31, 2004. The sale will enable Other assets (includes emission credits) 35.6 37.5
WPS Resources to reduce uncontracted merchant exposure and Assets held for sale $116.4 $121.2
redeploy capital into markets with different risk profiles. Based on Other current liabilities $ 0.6 $ 0.6
the terms of the asset sale agreement, the sale price is anticipated to Asset retirement obligations 2.1 –
be approximately $120 million, subject to various working capital Liabilities held for sale $ 2.7 $ 0.6
adjustments. WPS Power Development is also separately negotiating
the sale of certain silt reserves that were utilized in the operations WPS Power Development financed Sunbury with equity from
of the Sunbury generation plant. WPS Resources and debt financing, including non-recourse debt and a
related interest rate swap. The interest rate swap is designated as a cash
At December 31, 2003, and 2002, respectively, the assets and liabilities
flow hedge and, as a result, the mark-to-market loss has been recorded as
associated with the Sunbury generation plant that will be transferred
a component of other comprehensive income. If management determines
to the buyer as well as certain silt reserves have been classified as held
that the hedged transactions (i.e. future interest payments on the debt) will
for sale in accordance with Statement of Financial Accounting Standards
not continue after the sale, WPS Resources will be required to recognize the
No. 144, “Accounting for the Impairment or Disposal of Long-Lived
amount accumulated within other comprehensive income ($6.1 million
Assets.” Statement No. 144 requires that a long-lived asset classified
at December 31, 2003) currently in earnings. No such determination has
as held for sale be measured at the lower of its carrying amount or fair
been made at December 31, 2003.
value, less costs to sell, and cease being depreciated. No adjustments to
write down assets held for sale were required in 2003. WPS Resources WPS Power Development has an obligation to service a 200-megawatt
plans to complete the sale of the Sunbury generation plant and certain outtake contract through December 31, 2004. WPS Power Development
silt reserves in 2004 and, therefore, the assets and liabilities recorded entered into the contract in conjunction with the acquisition of the Sunbury
as held for sale are classified as current assets and current liabilities, generating assets. At December 31, 2003, WPS Power Development has
respectively, in the Consolidated Balance Sheets. The major classes hedged its obligation to service its 200-megawatt outtake contract subsequent
of assets and liabilities held for sale are as follows at December 31: to the date of the anticipated sale of Sunbury (estimated to be August 31,
2004). The revenues from the outtake contract are $2.7 million less than
58 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
When poles are hollow or
rotten, Line Electricians quickly
replace them with new, safer
poles. On the left, Bernard
Gauthier, Jr., in Wausaukee,
Wisconsin, discards a damaged
pole. On the right, Jim Fischer
and Bernard (right) know
the importance of doing
any job safely.
the hedged cost of purchased power. This loss will be included as a subsidiary and our discontinued operations did not occur in 2003 or
component of the loss from discontinued operations in the Consolidated 2002, and we have determined that similar sales will continue with
Statements of Income when realized. The amount of the loss is subject to third parties after the discontinuance; therefore, the $3.4 million sales
change if the sale does not close on August 31, 2004. price is reflected in continuing operations in 2001. The market value
of the related party sales was $4.3 million in 2001.
A summary of the components of discontinued operations recorded
in the Consolidated Statements of Income for the years ended A summary of the components of cash used in discontinued operations
December 31 was as follows: recorded in the Consolidated Statements of Cash Flows for the years
ended December 31 is as follows:
(Millions) 2003 2002 2001
Nonregulated revenue $ 81.2 $ 87.2 $ 86.4
(Millions) 2003 2002 2001
Operating expenses (97.7) (91.3) (91.8)
Interest expense (6.2) (5.8) (5.9) Net cash operating activities $(3.2) $ 5.5 $ (1.2)
Loss before taxes (22.7) (9.9) (11.3) Net cash investing activities (3.4) (19.4) (4.5)
Income tax benefit (6.7) (3.9) (4.4) Net cash financing activities (3.0) (2.9) (6.1)
Discontinued operations, net of tax $(16.0) $ (6.0) $ (6.9) Change in cash and cash equivalents $(9.6) $(16.8) $(11.8)
Interest expense represents the nonrecourse term loans directly related During 2003, 2002, and 2001 cash paid for interest associated with
to Sunbury. the non-recourse debt of discontinued operations was $5.5 million,
$5.8 million, and $6.2 million, respectively.
In 2001, a consolidated subsidiary of WPS Resources sold electricity
to our discontinued operations for $3.4 million. Sales between this
NOTE 5—PROPERTY, PL ANT, AN D EQU I PMENT
Property, plant, and equipment consists of the following utility, nonutility, and nonregulated assets.
(Millions) 2003 2002
Electric utility $2,288.9 $2,058.8
Gas utility 457.2 427.3
Total utility plant 2,746.1 2,486.1
Less: Accumulated depreciation 1,200.8 1,079.4
Net 1,545.3 1,406.7
Construction in progress 89.3 101.8
Nuclear fuel, less accumulated amortization 20.3 24.6
Net utility plant 1,654.9 1,533.1
Nonutility plant 20.3 19.1
Less: Accumulated depreciation 4.9 4.4
Net nonutility plant 15.4 14.7
Electric nonregulated 161.2 158.3
Gas nonregulated 7.0 6.9
Other nonregulated 20.8 20.4
Total nonregulated property, plant, and equipment 189.0 185.6
Less: Accumulated depreciation 30.6 21.1
Net nonregulated property, plant, and equipment 158.4 164.5
Total property, plant, and equipment $1,828.7 $1,712.3
W PS R E S O U R C E S CO R P O R ATI O N 59

Notes to Consolidated Financial Statements
NOTE 6—ACQUISITIONS AND SALES OF ASSETS
SALE OF HYDROELECTRIC PROJECTS Sunbury generation plant that will be transferred to the buyer in this
Wisconsin Public Service sold 542 acres of land near the Peshtigo River to transaction have been classified as held for sale on the Consolidated
the Wisconsin Department of Natural Resources in 2003 for $6.5 million Balance Sheets and the operations and cash flows related to the
as part of a multi-phase agreement reached between the parties in 2001. operations of the Sunbury generation plant that will be eliminated upon
Under the terms of the 2001 agreement, the Department of Natural Resources the date of sale have been classified as discontinued operations within
bought more than 5,000 acres of land for $13.5 million in 2001 and has the Consolidated Statements of Income and Consolidated Statements
an option to purchase an additional 179 acres in 2004 for approximately of Cash Flows, respectively.
$5 million (in March 2004, the Wisconsin Department of Natural Resources
exercised this option). Pending the close of the third and final phase of the K EWAU N E E N U C L EA R P OW E R P L A N T
agreement in 2004, Wisconsin Public Service will donate an additional On November 7, 2003, Wisconsin Public Service entered into a definitive
5,176 acres to the state. The sale is a part of our asset management strategy. agreement to sell its 59% ownership interest in the Kewaunee nuclear
power plant to a subsidiary of Dominion Resources, Inc. The other joint
WAU SAU, W I S CO N S I N , TO D U LUTH , owner of Kewaunee, Wisconsin Power and Light Company, also agreed
M I N N E S O TA , T R A N S M I S S I O N L I N E to sell its 41% ownership interest in Kewaunee to Dominion. The
On April 18, 2003, the Public Service Commission of Wisconsin transaction is subject to approval from various regulatory agencies,
approved Wisconsin Public Service’s request to transfer its interest in including the Public Service Commission of Wisconsin, the Federal
the Wausau, Wisconsin, to Duluth, Minnesota, transmission line to Energy Regulatory Commission, the Nuclear Regulatory Commission,
the American Transmission Company. American Transmission Company and several other state utility regulatory agencies and is projected to
is a for-profit transmission-only company created by the transfer of close in 2004. Approval has already been obtained from the Iowa
transmission assets previously owned by multiple electric utilities serving Public Utility Commission.
the upper Midwest in exchange for an ownership interest in the
Wisconsin Public Service estimates that its share of the cash proceeds
company. Wisconsin Public Service sold, at book value, approximately
from the sale will approximate $130 million, subject to various post-
$20.1 million of assets related to the Wausau to Duluth transmission
closing adjustments. The cash proceeds from the sale are expected to
line to American Transmission Company in June 2003. No gain or loss
slightly exceed the carrying value of the Wisconsin Public Service assets
was recognized on the transaction. In 2003, WPS Resources invested
being sold. In addition to the cash proceeds, Wisconsin Public Service
$14.0 million in American Transmission Company, related to its
will retain ownership of the assets contained in its non-qualified
agreement to fund approximately half of the Wausau, Wisconsin, to
decommissioning trust, one of two funds that were established to cover
Duluth, Minnesota, transmission line. In December 2003, Wisconsin
the eventual decommissioning of Kewaunee. The pre-tax fair value of the
Public Service also transferred other transmission assets to American
non-qualified decommissioning trust’s assets at December 31, 2003, was
Transmission Company, increasing its investment an additional
$115.1 million. Dominion will assume responsibility for the eventual
$5.9 million. At December 31, 2003, WPS Resources’ ownership interest
decommissioning of Kewaunee and will receive Wisconsin Public
in American Transmission Company was 19.8%. Our investment in
Service’s qualified decommissioning trust assets that had a fair value
American Transmission Company is described more fully in Note 10 –
of $239.7 million at December 31, 2003. Wisconsin Public Service will
Investments in Affiliates, at Equity Method.
request deferral of the gain expected to result from this transaction
GUAR DIAN PI PELI N E and related costs from the Public Service Commission of Wisconsin.
On May 30, 2003, WPS Resources purchased a one-third interest in Accordingly, Wisconsin Public Service anticipates most of the gain on the
Guardian Pipeline, LLC, from CMS Gas Transmission Company for sale of the plant assets and the related non-qualified decommissioning
approximately $26 million. Guardian Pipeline owns a natural gas trust assets will be returned to customers under future rate orders. As of
pipeline, which began operating in 2002, that stretches about 140 miles December 31, 2003, Wisconsin Public Service’s share of the carrying value
from near Joliet, Illinois, into southern Wisconsin. The pipeline can of assets and liabilities included within the sale agreement were as follows:
transport up to 750 million cubic feet of natural gas daily. Our interest
in Guardian Pipeline, LLC, is accounted for as an equity method investment (Millions) 2003
and is described more fully in Note 10 – Investments in Affiliates, at
Property, plant, and equipment, net $421.8
Equity Method. As the consideration paid for Guardian Pipeline
Other current assets 5.2
approximates the underlying equity in the net assets of this investment,
Total assets $427.0
no purchase accounting adjustments were required. This pipeline
improves natural gas price competition in Wisconsin and is critical Regulatory liabilities $ (25.7)
to natural gas reliability in the state. Asset retirement obligations 343.6
Total liabilities $317.9
SUNBURY
As discussed in Note 4 – Assets Held for Sale, WPS Power Development The assets and liabilities disclosed above do not meet the criteria to be
entered into a definitive agreement on October 24, 2003, to sell its classified as held for sale on the Consolidated Balance Sheets under the
Sunbury generation plant for approximately $120 million, subject to provisions of FASB Statement No. 144 due to uncertainties inherent in
certain working capital adjustments. The assets and liabilities of the the regulatory approval process.
60 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Upon the closing of the sale, Wisconsin Public Service will enter into a Federal Energy Regulatory Commission and the Michigan Public Service
long-term power purchase agreement with Dominion to purchase energy Commission, began in 2003 and will also occur over 20 years.
and capacity equivalent to the amounts that would have been received
The transaction also includes a new power purchase agreement with
had current ownership in the Kewaunee nuclear power plant continued.
Calpine’s Fox Energy Center, which is currently under construction in
The power purchase agreement, which also will require regulatory
Kaukauna, Wisconsin. The Fox Energy Center is being constructed as
approval, will extend through 2013 when the plant’s current operating
a 235-megawatt gas-fired facility and is scheduled for completion in
license will expire. Fixed monthly payments under the power purchase
June 2005. Wisconsin Public Service will purchase 150 megawatts of
agreement will approximate the expected costs of production had
electricity from June 2005 through June 2006, increasing to an estimated
Wisconsin Public Service continued to own the plant. Therefore,
235 megawatts annually in 2006 through 2015 from this plant. The
management believes that the sale of Kewaunee and the related
additional capacity is needed to serve expected growth in northeast
power purchase agreement will provide more price certainty for
Wisconsin. The new power purchase agreement is contingent on timely
Wisconsin Public Service’s customers and reduce our risk profile.
plant construction and does not meet the requirements of a capital lease.
Q U E S T E N E R G Y, L L C
E C O C O A L P E L L E T I Z AT I O N # 1 2
Through 2002, WPS Resources provided financial support and energy
In November 2001, WPS Power Development, through its subsidiary
supply services to a third party, Quest Energy, LLC, a Michigan limited
ECO Coal Pelletization #12 LLC, entered into a transaction to acquire
liability company that markets electric power to retail customers in
from its partner the remaining interest in the synthetic fuel producing
Michigan. Financial support was in the form of wholesale electric sales
facility (partially owned by ECO #12). Concurrently, with this transaction,
extended without generally required credit assurances, an interest-bearing
WPS Power Development entered into a separate transaction with a
note including an equity conversion option with an initial maturity date
subsidiary of a public company resulting in ECO #12 contributing 100%
of May 2005, and trade credit indebtedness, all secured by the assets of
of its synthetic fuel producing machinery to a newly formed entity in
Quest. WPS Energy Services reported revenues related to wholesale
exchange for cash and a one-third ownership interest in the newly
electric sales to Quest of $1.4 million in 2002 and $0.3 million in 2001.
formed entity.
WPS Resources assigned the equity conversion option to WPS Energy
Services on January 29, 2003, and WPS Energy Services acquired a 100% As a result of these transactions, WPS Power Development was the sole
ownership interest in Quest. Prior to the acquisition, Quest Energy member of ECO #12. ECO #12 holds a one-third minority ownership
Holdings, LLC, an independent Michigan limited liability company and interest in an entity, which produces synthetic fuel from coal qualifying
owner of Quest Energy, LLC, appointed WPS Energy Services as manager for tax credits under Section 29 of the Internal Revenue Code. The sale
of Quest Energy, LLC, in November 2002. The appointment as manager, of synthetic fuel produced by this facility entitles ECO #12 to a portion
as well as other factors, including the provision of substantial financial of the Section 29 tax credits generated.
support, resulted in Quest’s financial statements being consolidated with
These transactions generated a pre-tax gain of $40.2 million of which
those of WPS Resources as of December 31, 2002. WPS Energy Services
$38.0 million had been deferred as of December 31, 2001, as a result of
utilized the purchase accounting method to account for this acquisition.
certain rights of rescission and put options being granted to the buyer.
There was no cash consideration paid; therefore, the purchase price of
The rights of rescission and the put options expired in 2002 and, as a result,
$0.7 million was equivalent to the carrying value of the note receivable
WPS Power Development recognized all of the $38.0 million deferred gain
from Quest on December 31, 2002. There was no goodwill recorded
in miscellaneous income on the Consolidated Statement of Income in 2002.
in this acquisition, as the purchase price approximated the fair value
of the acquired assets and liabilities. The actual payments for the purchase of the former partner’s interest in
ECO #12 were contingent upon the same provisions referred to above.
DE PERE ENERGY CENTER As a result, $21.3 million was originally held in escrow and was released
On December 16, 2002, Wisconsin Public Service completed the purchase proportionately as the respective rescission rights and put options expired.
of the 180-megawatt De Pere Energy Center from Calpine Corporation, As of December 31, 2002, this escrow had a balance of $3.5 million,
a California-based independent power producer. Prior to this purchase, $2.7 million of which was released in 2003 as the remaining contingencies,
the power from the De Pere Energy Center was under long-term contract not related to the recognition of the deferred gain, expired. As a result
to Wisconsin Public Service and was accounted for as a capital lease. of negotiations with our former partner, the remaining $0.8 million was
This power purchase agreement required Calpine to expand the facility released to WPS Power Development and recorded as a gain, within
in the future. The power purchase agreement became uneconomical in miscellaneous income, in 2003.
the current market. Concurrent with the purchase, the long-term power
purchase contract was terminated. The $120.4 million purchase included On December 19, 2002, WPS Power Development sold an approximate
a $72.0 million payment upon closing and a $48.4 million payment in 30% interest in ECO #12 to a third party. The buyer purchased the
December 2003. As a result of the purchase, the capital lease obligation Class A interest in ECO #12 which gives the buyer a preferential
was reversed and the difference between the capital lease asset and the allocation of tons of synthetic fuel produced and sold annually. The
$120.4 million purchase price was recorded as a regulatory asset. Of the buyer may be allocated additional tons of synthetic fuel if WPS Power
$47.8 million regulatory asset initially recorded, $45.6 million is under Development makes them available, but neither party is obligated
the jurisdiction of the Public Service Commission of Wisconsin and will beyond the required annual allocation of tons. The buyer’s share of losses
be amortized over 20 years beginning on January 1, 2004. Amortization generated from the synthetic fuel operation, $5.6 million in 2003, is
of the remaining regulatory asset, which is under the jurisdiction of recorded as minority interest in the Consolidated Statements of Income.
W PS R E S O U R C E S CO R P O R ATI O N 61

Notes to Consolidated Financial Statements
WPS Power Development received consideration of $3.0 million cash, as value of the acquired assets and liabilities. The business is part of the
well as a fixed note and a variable note for the second sale transaction. operations of WPS Energy Services of Canada Corp., a subsidiary of
Payments under the variable note are contingent upon the synthetic fuel WPS Energy Services, which was created in October 2002.
production facility achieving specified levels of synthetic fuel production.
In conjunction with the sale, WPS Power Development has agreed to make W P S E M P I R E S TAT E , I N C .
certain payments to a third party broker, consisting of an up front payment Effective June 1, 2002, WPS Power Development acquired CH Resources,
of $1.5 million (which was paid at the time of closing), $1.9 million which Inc. from Central Hudson Energy Services, Inc. The corporate name of
was paid in 2003 and a projected payment of $1.9 million in 2004. A CH Resources, Inc. was changed to WPS Empire State, Inc. WPS Empire
deferred gain of $9.2 million and $11.6 million was reflected on WPS Power State owns three power plants and associated assets in upstate New York
Development’s balance sheet at December 31, 2003, and 2002, respectively. with a combined capacity of 258 megawatts. WPS Power Development
This deferred gain represents the present value of future payments under used the purchase method of accounting to account for the acquisition,
the fixed note and the upfront cash payments net of transaction costs. accordingly the operations of WPS Empire State are included in the financial
It does not include an amount for the variable note, which is contingent statements presented for WPS Resources for all periods beginning June 1,
upon the synthetic fuel production. Payments on the variable note are a 2002, but do not have a material impact. The purchase price, including
function of fuel production and are recognized as a component of the acquisition costs, was $61.1 million. There was no goodwill recorded in
gain when received. In 2003, a pre-tax gain in the amount of $7.6 million this acquisition, as the purchase price approximated the fair value of the
was recognized as a component of miscellaneous income related to this acquired assets and liabilities.
transaction. Similar gains are expected to result from this transaction
W I S C O N S I N R I V E R P O W E R C O M PA N Y
through 2007. There was no gain recognized in 2002 from the 2002 sale.
Wisconsin Public Service increased its ownership in Wisconsin River Power
C A N A D I A N R E TA I L G A S B U S I N E S S Company to two-thirds by purchasing an additional one-third interest from
On November 1, 2002, WPS Energy Services entered into an agreement Consolidated Water Power Company in 2000. In December 2001, Wisconsin
to purchase a book of retail gas business in the Canadian provinces of Power and Light Company exercised its option to purchase one-half of
Quebec and Ontario. Consideration for the purchase consists of an earn- Wisconsin Public Service’s additional one-third share of Wisconsin River
out to the seller based on a percentage of gross margin on the volume of Power. Both transactions were at net book value of Wisconsin River Power
natural gas delivered to certain customers during a two-year period ending at August 31, 2000. As a result, Wisconsin Public Service and Wisconsin
October 31, 2004. The earn-out is equivalent to fixed percentages of gross Power and Light each own one-half of Wisconsin River Power with
margin realized over this two-year period for customers already under Wisconsin Public Service remaining the operator of the facility.
contract and for customers appearing on the acquired customer list who
ADDITIONAL I NTER EST I N
entered into a contract with WPS Energy Services subsequent to the date
K EWAU N E E N U C L EA R P OW E R P L A N T
of purchase. Total consideration paid from the acquisition date through
On September 24, 2001, Wisconsin Public Service acquired Madison
December 31, 2003, approximated $0.8 million. This transaction was
Gas and Electric Company’s 17.8% interest in the Kewaunee nuclear
accounted for using the purchase method of accounting; therefore, the
power plant including its decommissioning trust assets. As a result of
results of operations are included in the financial statements presented for
the $17.5 million purchase, Wisconsin Public Service now owns 59%
WPS Resources only since the acquisition date. There was no goodwill
of the plant with the remaining portion held by Wisconsin Power
recorded in the acquisition as the purchase price approximated the fair
and Light Company. The additional share of the operations of the
Kewaunee nuclear power plant is included in the financial statements
of Wisconsin Public Service beginning September 24, 2001. Madison
Gas and Electric retains its obligations as they relate to the plant for
the period of time it was an owner.
Madison Gas and Electric maintained one decommissioning trust fund
that accumulated its remaining contributions in accordance with its existing
funding plan, which extended to December 31, 2002. On January 3, 2003,
Madison Gas and Electric transferred the assets of the remaining trust
fund to a Wisconsin Public Service trust fund. This trust fund has
been included in our financial statements since the initial transaction.
Wisconsin Public Service assumed Madison Gas and Electric’s share
of the decommissioning obligations in exchange for these trust funds.
See earlier discussion in this section for additional information related
to the sale of the Kewaunee nuclear power plant.
Jeffrey Sievert, a Fleet Mechanic in the Wisconsin
Public Service Wausaukee service center, helps keep
our vehicles in top running order.
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The energy within
W I S C O N S I N F U E L A N D L I G H T C O M PA N Y We adopted Statement of Financial Accounting Standard No. 142,
On April 1, 2001, Wisconsin Public Service completed a merger with “Goodwill and Other Intangible Assets,” on January 1, 2002. In
Wisconsin Fuel and Light Company. Wisconsin Fuel and Light served accordance with the requirements of this statement, we ceased
residential, commercial, and industrial natural gas customers in amortizing the goodwill on January 1, 2002. In 2003, Wisconsin Public
Manitowoc and Wausau, Wisconsin. Wisconsin Fuel and Light’s Service transferred $0.9 million from a regulatory acquisition premium
shareholders received 1.73 shares of WPS Resources’ common stock (previously classified as property, plant, and equipment) to goodwill.
for each share of Wisconsin Fuel and Light common stock. A total See Note 11 – Goodwill and Other Intangible Assets for more
of 1,763,943 shares were issued resulting in a purchase price of information.
$54.8 million based on an average price of $31.0625, the prevailing
The remaining premium, $4.9 million after taxes, was recorded as
price at the time of the merger announcement.
an acquisition adjustment in plant, which we expect to be recovered in
Wisconsin Public Service used the purchase method of accounting and Wisconsin retail rates over the three-year period of 2003 through 2005.
recorded $41.9 million of total premium associated with the purchase. The acquisition premium will be amortized over the recovery period.
Of the total premium, $36.1 million was recorded as goodwill and
The operations of Wisconsin Fuel and Light are included in the financial
is included within other assets on the Consolidated Balance Sheets.
statements presented for Wisconsin Public Service and WPS Resources for
During 2001, Wisconsin Public Service amortized $0.6 million of
the period beginning April 1, 2001, but do not have a material impact.
goodwill using the straight-line method over a period of 40 years.
N OT E 7 — J O I N T LY OW N E D U T I L I T Y FAC I L I T I E S
Information regarding Wisconsin Public Service’s share of major Wisconsin Public Service’s share of direct expenses for these plants is
jointly owned electric-generating facilities in service at December 31, included in the corresponding operating expenses in the Consolidated
2003, is set forth below: Statements of Income. Wisconsin Public Service has supplied its own
financing for all jointly owned projects.
West Columbia
Marinette Energy Edgewater Kewaunee
(Millions, except for percentages) Unit No. 33 Center Unit No. 4 Plant
Ownership 68.0% 31.8% 31.8% 59.0%
Wisconsin Public Service’s share of plant nameplate capacity (megawatts) 56.8 335.2 105.0 315.0
Utility plant in service $18.0 $129.5 $28.8 $252.2
Accumulated depreciation $ 7.5 $ 82.5 $16.9 $180.8
In-service date 1993 1975 and 1978 1969 1974
NOTE 8—N UCLEAR PLANT OPERATION
On November 7, 2003, Wisconsin Public Service and Wisconsin Power On an interim basis, spent nuclear fuel storage space is provided at the
and Light Company entered into an agreement to sell the Kewaunee Kewaunee nuclear power plant. Expenses associated with interim spent
nuclear power plant to a subsidiary of Dominion Resources, Inc. The fuel storage at the Kewaunee nuclear power plant are recognized as
transaction is subject to approval from various regulatory agencies, current operating costs. At current production levels, the plant has
including the Public Service Commission of Wisconsin, the Federal sufficient storage for all fuel assemblies until 2009 with full core offload.
Energy Regulatory Commission, the Nuclear Regulatory Commission, Additional capacity will be needed by 2010 to maintain full core offload
and several other state utility regulatory agencies and is projected to capability for fuel assemblies in use at shutdown in 2013.
close in the second half of 2004. Approval has already been obtained
The accumulated provision for nuclear fuel, which represents nuclear fuel
from the Iowa Public Utility Commission. See Note 6 – Acquisitions
purchases and amortization, totaled $265.1 million at December 31, 2003,
and Sales of Assets for more information on the transaction.
and $256.9 million at December 31, 2002.
The quantity of heat produced for the generation of electric energy by the
For information on the depreciation policy for the Kewaunee nuclear
Kewaunee nuclear power plant is the basis for the amortization of the costs
power plant, see Note 1(H) – Property, Plant, and Equipment.
of nuclear fuel to electric production fuel expense, including an amount for
ultimate disposal. These costs are recovered currently from customers in Wisconsin Public Service’s share of nuclear decommissioning costs to date
rates. The ultimate storage of fuel is the responsibility of the United States has been accrued over the estimated service life of the Kewaunee nuclear
Department of Energy pursuant to a contract required by the Nuclear Waste power plant, recovered currently from customers in rates, and deposited
Act of 1982. The Department of Energy receives quarterly payments for the in external trusts. Such costs totaled $3.0 million in 2003 and $2.6 million
storage of fuel based on generation. During 2003, payments from Wisconsin in both 2002 and 2001. In developing our decommissioning funding plan,
Public Service to the Department of Energy totaled $2.3 million. During we assumed a long-term after-tax earnings rate of approximately 5%.
2002 and 2001, payments totaled $2.5 million and $1.4 million, respectively.
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Notes to Consolidated Financial Statements
At Upper Peninsula Power Company, the operating budget
is carefully planned, with input from individuals in key
areas. This includes, from left to right, Frank Stipech, UPPCO
Operations Manager; Robert Edwards, Superintendent –
Regional Generation; Dan Crane, Regional Account
Executive; George Mrosz, Superintendent – Substation and
Transmission Operations; Grant Larsen, Senior Business
Consultant; and Gary Erickson, Vice President.
As of December 31, 2003, the market value of the external nuclear
decommissioning trusts totaled $332.3 million.
As part of the anticipated sale of the Kewaunee nuclear power plant,
Wisconsin Public Service will transfer its qualified nuclear decommissioning Future decommissioning costs collected in customer rates and a charge
trust assets to Dominion. Wisconsin Public Service will retain the nonqualified for realized earnings from external trusts are included in depreciation
trust assets, which totaled $115.1 million pre-tax ($92.6 million net of expense. Realized trust earnings totaled $38.7 million in 2003, $1.7 million
tax) at December 31, 2003. The funds collected from customers for the in 2002, and $8.1 million in 2001. In 2002, unrealized gains and losses,
decommissioning obligation related to the nonqualified trust are expected net of taxes, in the external trusts were reflected as changes to the
to be refunded to customers in accordance with yet-to-be-determined decommissioning reserve, since decommissioning expense is recognized
regulatory guidelines. Also in conjunction with the anticipated sale, the as the gains and losses are realized, in accordance with regulatory
Public Service Commission of Wisconsin suspended funding into the retail requirements. The noncurrent liability for nuclear decommissioning
jurisdiction of Wisconsin Public Service’s decommissioning trusts for 2004. and other costs of removal included an accumulated provision for
For the wholesale jurisdiction, funding during 2004 will be $1.1 million. decommissioning totaling $290.5 million at December 31, 2002. In 2003,
the accumulated provision for decommissioning was removed from
In the fourth quarter of 2003, Wisconsin Public Service changed its nuclear decommissioning and other costs of removal as these costs are
investment strategy for its qualified trust and placed the assets in short-term now accounted for as asset retirement obligations in accordance with
investments. This was done to reduce volatility in the value of the trust for Statement No. 143 (see Note 1 (V) – New Accounting Pronouncements).
the anticipated transfer to Dominion at the time of closing of the Kewaunee
sale. A condition of the sale specifies a minimum amount of qualified trust If the sale is not consummated, Wisconsin Public Service’s share of the
assets to be transferred. This liquidation and reinvestment resulted in a Kewaunee nuclear power plant decommissioning, based on its 59%
sizable increase in realized earnings for 2003 and a corresponding increase ownership interest, is estimated to be $331 million in current (2003)
in depreciation expense. It also resulted in a sizable decrease in the percent dollars based on a site-specific study. The study was performed in 2002
of investments held in equity securities compared to prior years. by an external consultant and will be used as the basis for calculating
regulatory funding requirements. The study uses several assumptions,
Investments in the nuclear decommissioning trusts are recorded at fair including immediate dismantlement as the method of decommissioning
value. Investments at December 31, 2003, consisted of 27.9% equity and plant shutdown in 2013. Based on the standard cost escalation
securities and 72.1% fixed income securities. The investments are assumptions reflected in our current funding plan, which were determined
presented net of related income tax effects on unrealized gains, and based on the requirements of a July 1994 Public Service Commission of
represent the amount of assets available to accomplish decommissioning. Wisconsin order, the undiscounted amount of Wisconsin Public Service’s
The nonqualified trust investments designated to pay income taxes when share of decommissioning costs forecasted to be expended between the
unrealized gains become realized are classified as other assets. At years 2013 and 2037 is $929 million if the sale is not consummated. See
December 31, 2003, the amount classified as other assets was $22.5 million. Note 6 – Acquisitions and Sales of Assets for further discussion of the
An offsetting regulatory liability reflects the expected reduction in pending sale of the Kewaunee nuclear power plant.
future rates as unrealized gains in the nonqualified trust are realized.
Information regarding the cost and fair value of the external nuclear Beginning January 1, 2003, we adopted Statement No. 143. This statement
decommissioning trusts, net of tax is set forth below: applies to all entities with legal obligations associated with the retirement
of a tangible long-lived asset that results from the acquisition, construction,
or development and/or normal operation of that asset. We have identified
2003 Security Type Fair Unrealized the final decommissioning of the Kewaunee nuclear power plant as an
(Millions) Value Cost Gain
asset retirement obligation and have recorded an asset retirement
Fixed income $239.7 $239.6 $ 0.1 obligation of $343.6 million at December 31, 2003. This amount is based
Equity 92.6 59.1 33.5 on several significant assumptions, including the scope of decommissioning
Balance at December 31 $332.3 $298.7 $33.6
work performed, the timing of future cash flows, and inflation and
2002 Security Type Fair Unrealized discount rates. Some of these assumptions differ significantly from the
(Millions) Value Cost Gain assumptions authorized by the Public Service Commission of Wisconsin to
Fixed income $119.7 $114.0 $ 5.7 calculate the nuclear decommissioning liability for funding purposes. For
Equity 170.8 143.0 27.8 more information on Statement No. 143 and its impact on the Kewaunee
Balance at December 31 $290.5 $257.0 $33.5 nuclear power plant refer to Note 16 – Asset Retirement Obligations.
64 W PS R E S O U R C E S CO R P O R ATI O N

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NOTE 9—REGU LATORY ASSETS AN D LIABI LITI ES
The following regulatory assets and liabilities are reflected in our consolidated balance sheets as of December 31:
WPS Resources’ Regulatory Assets/Liabilities (Millions) 2003 2002
Regulatory assets
De Pere Energy Center $ 47.7 $ 47.8
Environmental remediation costs (net of insurance recoveries) 41.0 40.0
Minimum pension liability 15.2 –
Deferred nuclear costs 4.9 7.9
Automated meter reading costs 4.5 2.6
Plant related costs 2.6 0.3
Funding for enrichment facilities 2.4 3.0
Unamortized loss on debt 1.4 2.1
Other 8.0 7.2
Total $127.7 $110.9
Regulatory liabilities
Cost of removal reserve $180.0 $ –
Asset retirement obligations 66.9 –
Unrealized gain on decommissioning trust 22.5 13.0
Income tax related items 11.8 17.7
Derivatives 8.4 1.4
Demand-side management expenditures 5.3 5.9
Deferred gain on emission allowance sales 5.1 3.8
Deferred American Transmission costs 3.4 3.1
Interest from tax refunds 0.7 4.8
Other 0.3 –
Total $304.4 $ 49.7
Our utility subsidiaries expect to recover their regulatory assets and Wisconsin Public Service and Upper Peninsula Power will continue to
return their regulatory liabilities through rates charged to customers recover from customers the regulatory assets described above.
based on specific ratemaking decisions or precedent for each item over
See Note 6 – Acquisitions and Sales of Assets, Note 16 – Asset Retirement
periods specified by the regulators or over the normal operating period
Obligations, Note 17 – Income Taxes, and Note 19 – Employee Benefit
of the assets and liabilities to which they relate. Except for amounts
Plans for specific information on regulatory deferrals related to the De Pere
expended for environmental costs, Wisconsin Public Service is recovering
Energy Center, asset retirement obligations and cost of removal, income
carrying costs for all regulatory assets. Upper Peninsula Power may
taxes, and pensions. See Note 18 – Commitments and Contingencies for
recover carrying costs on environmental regulatory assets. Based on prior
information on environmental remediation deferred costs.
and current rate treatment for such costs, we believe it is probable that
NOTE 10—I NVESTMENTS I N AFFI LIATES, AT EQU ITY METHOD
Investments in corporate joint ventures and other companies accounted transmission-only company. It owns, maintains, monitors, and operates
for under the equity method at December 31, 2003 and 2002 follow. electric transmission assets in portions of Wisconsin, Michigan, and
Illinois. American Transmission Company began operation on January 1,
2001. Its assets previously were owned and operated by multiple
(Millions) 2003 2002
electric utilities serving the upper Midwest, all of which transferred their
American Transmission Company, LLC $ 79.9 $57.5 transmission assets to American Transmission Company in exchange
Guardian Pipeline, LLC 27.4 – for an ownership interest. A Wisconsin law encouraged utilities in the
Wisconsin River Power Company 12.8 9.6
Other 4.9 6.1 state to transfer ownership and control of their transmission assets
Investments in affiliates, at equity method $125.0 $73.2 to a state-wide transmission company.
Wisconsin Public Service contributed its transmission assets on
Investments in affiliates under the equity method are a component of other January 1, 2001, and Upper Peninsula Power contributed its transmission
assets on the Consolidated Balance Sheets and the equity income is recorded assets on June 28, 2001. During 2003, Wisconsin Public Service made
in miscellaneous income on the Consolidated Statements of Income. additional contributions and sold the Wausau, Wisconsin, to Duluth,
Minnesota, transmission line to the American Transmission Company.
WPS Investments, LLC, a consolidated subsidiary of WPS Resources, had
See Note 6 – Acquisitions and Sales of Assets for more information
a 19.8% ownership interest in American Transmission Company, LLC, at
on these transactions.
December 31, 2003. American Transmission Company is a for-profit,
W PS R E S O U R C E S CO R P O R ATI O N 65

Notes to Consolidated Financial Statements
Wisconsin Public Service and Upper Peninsula Power record related Wisconsin Public Service recorded dividends received of $1.5 million
party transactions for services provided to and network transmission from Wisconsin River Power at December 31, 2003.
services received from American Transmission Company. Charges to
Condensed financial data of Wisconsin River Power Company follows:
American Transmission Company for services provided by Wisconsin
Public Service were $14.4 million, $12.9 million, and $11.3 million in
2003, 2002, and 2001, respectively. Upper Peninsula Power charged (Millions) 2003 2002 2001
$7.6 million, $5.8 million, and $2.7 million for 2003, 2002, and 2001,
Income statement data
respectively for services provided. Network transmission costs paid to Revenues $ 6.7 $ 6.4 $ 5.5
American Transmission Company by Wisconsin Public Service were Operating expenses (5.0) (4.9) (4.3)
$33.6 million, $31.0 million, and $25.2 million in 2003, 2002, and 2001, Other income (expense) 7.7 4.2 1.4
respectively. Upper Peninsula Power recorded network transmission Net income $ 9.4 $ 5.7 $ 2.6
costs of $4.4 million, $5.0 million, and $3.3 million in 2003, 2002, and Wisconsin Public Service’s equity
2001, respectively. in net income $ 4.7 $ 2.7 $ 1.8
WPS Resources recorded dividends received of $7.5 million from Balance sheet data
American Transmission Company at December 31, 2003. Current assets $ 8.3 $ 3.6 $ 2.1
Non-current assets 19.9 20.1 16.5
Condensed financial data of American Transmission Company follows: Total assets $28.2 $23.7 $18.6
Current liabilities $ 1.1 $ 3.5 $ 4.3
(Millions) 2003 2002 2001 Other non-current liabilities 1.7 1.0 0.8
Shareholders’ equity 25.4 19.2 13.5
Income statement data Total liabilities and shareholders’equity $28.2 $23.7 $18.6
Revenues $225.6 $205.3 $174.5
Operating expenses (139.5) (131.1) (110.1) WPS Investments, LLC, a consolidated subsidiary of WPS Resources,
Other income (expense) (23.4) (20.1) (11.2) purchased a 33% ownership interest in Guardian Pipeline, LLC, on
Net income $ 62.7 $ 54.1 $ 53.2
May 30, 2003. Guardian Pipeline owns a natural gas pipeline, which
WPS Investment’s equity in net income $ 10.1 $ 7.9 $ 7.1 began operating in 2002, that stretches about 140 miles from near
Joliet, Illinois, into southern Wisconsin. It can transport up to
Balance sheet data
Current assets $ 33.1 $ 40.7 $ 56.7 750 million cubic feet of natural gas daily.
Non-current assets 927.3 754.3 666.2
Condensed financial data of Guardian Pipeline, LLC, as of
Total assets $960.4 $795.0 $722.9
December 31, 2003, and for the period from May 30, 2003,
Current liabilities $ 66.6 $ 46.9 $ 36.1 to December 31, 2003, follows:
Long-term debt 448.2 348.0 297.9
Other non-current liabilities 12.9 6.6 3.2 (Millions) 2003
Shareholders’ equity 432.7 393.5 385.7 Income statement data
Total liabilities and shareholders’equity $960.4 $795.0 $722.9 Revenues $ 20.6
Operating expenses (8.7)
Wisconsin River Power Company, of which Wisconsin Public Service Other income (expense) (8.2)
owns 50% of the voting stock, is incorporated under the laws of the Net income $ 3.7
state of Wisconsin and has its principal office at the principal executive
offices of Wisconsin Public Service. Wisconsin River Power’s business WPS Investment’s equity in net income $ 1.2
consists of the operation of an oil-fired combustion turbine and two Balance sheet data
hydroelectric plants on the Wisconsin River. The energy output of the Current assets $ 7.4
hydroelectric plants is sold in equal parts to the three companies that Non-current assets 270.9
previously owned equal proportions of all of the outstanding stock of Total assets $278.3
Wisconsin River Power (Wisconsin Public Service, Wisconsin Power Current liabilities $ 10.2
and Light, and Consolidated Water Power). The electric power from Long-term debt 175.6
the combustion turbine is sold in equal parts to Wisconsin Public Shareholders’ equity 92.5
Service and Wisconsin Power and Light. Total liabilities and shareholders’equity $278.3
Wisconsin Public Service records related party transactions for sales to Other investments accounted for under the equity method include
and purchases from Wisconsin River Power. Revenues from services WPS Nuclear Corporation’s (a consolidated subsidiary of WPS Resources)
provided to Wisconsin River Power were $1.4 million, $1.5 million, investment in Nuclear Management Company, LLC. The Nuclear
and $0.9 million for 2003, 2002, and 2001, respectively. Purchases from Management Company is owned by affiliates of five utilities in the upper
Wisconsin River Power by Wisconsin Public Service were $2.0 million, Midwest and operates the six nuclear power plants of these utilities.
$2.1 million, and $1.7 million for 2003, 2002, and 2001, respectively. At December 31, 2003, WPS Nuclear Corporation’s ownership in
66 W PS R E S O U R C E S CO R P O R ATI O N

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Nuclear Management Company was 20%. Wisconsin Public Service recorded $16.4 million in 2003, 2002, and 2001, respectively. Management service
related party transactions for services provided by Nuclear Management fees paid to Nuclear Management Company in 2003 and 2002 reflect
Company for the management and operation of the Kewaunee nuclear a 17.8% increase in Wisconsin Public Service’s ownership of the
plant. Management service fees paid to Nuclear Management Company Kewaunee plant after acquiring Madison Gas and Electric Company’s
by Wisconsin Public Service were $25.2 million, $24.6 million, and ownership in the Kewaunee plant on September 24, 2001.
NOTE 11—GOODWI LL AN D OTH ER I NTANGI BLE ASSETS
Goodwill recorded by WPS Resources Corporation was $36.4 million and goodwill recorded from the Wisconsin Fuel and Light merger allowed by
$35.5 million at December 31, 2003, and 2002, respectively. The goodwill the Public Service Commission of Wisconsin in its March 2003 rate order.
is recorded in Wisconsin Public Service’s natural gas segment relating to
Goodwill and purchased intangible assets are included in other assets on
its merger with Wisconsin Fuel and Light. In 2003, Wisconsin Public
the Consolidated Balance Sheets. Information in the tables below relates
Service transferred $0.9 million from a regulatory acquisition premium
to total purchased identifiable intangible assets for the years indicated
(previously classified as property, plant and equipment) to goodwill. The
(excluding assets held for sale).
increase in goodwill reflects an adjustment to the amount of recoverable
(Millions) December 31, 2003
Average Life Gross Carrying Accumulated
Asset Class (Years) Amount Amortization Net
Emission credits 1 to 30 $ 7.4 $(1.1) $6.3
Customer related 1 to 5 3.7 (3.0) 0.7
Other 1 to 30 3.3 (0.6) 2.7
Total $14.4 $(4.7) $9.7
(Millions) December 31, 2002
Average Life Gross Carrying Accumulated
Asset Class (Years) Amount Amortization Net
Emission credits 1 to 30 $ 5.2 $(0.6) $4.6
Customer related 1 to 5 3.5 (2.0) 1.5
Other 1 to 30 3.3 (0.4) 2.9
Total $12.0 $(3.0) $9.0
The generation assets of WPS Power Development are subject to Estimated Amortization Expense:
regulations on sulfur dioxide and nitrogen oxide emissions. In 2003,
For year ending December 31, 2004 $1.6 million
WPS Power Development had a net increase in the gross carrying value
For year ending December 31, 2005 1.3 million
of their emissions credits due to additional purchases of emission
For year ending December 31, 2006 0.9 million
allowances to meet requirements, partially offset by the write-down
For year ending December 31, 2007 1.3 million
of existing nitrogen oxide allowances to market value.
For year ending December 31, 2008 1.4 million
Intangible asset amortization expense, in the aggregate, for the
years ended December 31, 2003, and 2002, was $1.7 million and
$1.0 million, respectively.
NOTE 12—LEASES
The company leases various property, plant and equipment. Terms Year ending December 31 (Millions)
of the leases vary, but generally require the company to pay property
taxes, insurance premiums, and maintenance costs associated with the 2004 $ 5.0
2005 2.8
leased property. Rental expense attributable to operating leases was 2006 2.0
$5.2 million, $5.1 million, and $7.1 million in 2003, 2002, and 2001, 2007 1.7
respectively. Future minimum rental obligations under non-cancelable 2008 1.4
operating leases, are payable as follows: Later years 6.1
Total payments $19.0
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Notes to Consolidated Financial Statements
NOTE 13—SHORT-TERM DEBT AND LINES OF CREDIT
WPS Resources Corporation has syndicated a $225 million 364-day The information in the table below relates to short-term debt and
revolving credit facility, and Wisconsin Public Service has syndicated lines of credit for the years indicated.
a $115 million 364-day revolving credit facility, to provide short-term
borrowing flexibility and security for commercial paper outstanding.
(Millions, except for percentages) 2003 2002 2001
As of end of year
Commercial paper outstanding $ 28.0 $ 16.0 $ 15.0
Average discount rate on outstanding commercial paper 1.15% 1.35% 1.95%
Short-term notes payable outstanding $ 10.0 $ 13.8 $ 31.2
Average interest rate on short-term notes payable 1.12% 1.22% 1.61%
Available (unused) lines of credit $288.9 $264.5 $130.0
For the year
Maximum amount of short-term debt $194.2 $133.4 $177.6
Average amount of short-term debt $104.3 $ 59.7 $110.6
Average interest rate on short-term debt 1.38% 1.73% 4.32%
The commercial paper had a maturity date of January 8, 2004.
The short-term notes payable is due “on demand.”
NOTE 14—LONG-TERM DEBT
At December 31 (Millions) 2003 2002
First mortgage bonds – Wisconsin Public Service
Series Year Due
6.80% 2003 $ – $ 50.0
6.125% 2005 – 9.1
6.90% 2013 22.0 22.0
7.125% 2023 50.0 50.0
Senior notes – Wisconsin Public Service
Series Year Due
6.125% 2011 150.0 150.0
4.875% 2012 150.0 150.0
4.80% 2013 125.0 –
6.08% 2028 50.0 50.0
First mortgage bonds – Upper Peninsula Power
Series Year Due
7.94% 2003 – 15.0
10.0% 2008 0.9 1.5
9.32% 2021 16.2 17.1
Unsecured senior notes – WPS Resources
Series Year Due
7.00% 2009 150.0 150.0
5.375% 2012 100.0 100.0
Term loans – nonrecourse, collateralized by nonregulated assets 87.2 91.7
Tax exempt bonds 27.0 27.0
Notes payable to bank, collateralized by nonregulated plant – 11.6
Senior secured note 2.9 3.1
Total 931.2 898.1
Unamortized discount and premium on bonds and debt (2.7) (2.6)
Total long-term debt 928.5 895.5
Less current portion (56.6) (71.1)
Total long-term debt $871.9 $824.4
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On January 19, 2004, Wisconsin Public Service retired $49.9 million of its the proceeds of which were used in substantial part to provide facilities.
7.125% series first mortgage bonds. These bonds had an original maturity Upon issuance of the refunding bonds, the original bonds were paid off.
date of July 1, 2023. WPS Westwood Generation was paid $27.0 million from the proceeds of
the refunding bonds for the retirement of the original bonds plus accrued
In February 2003, Wisconsin Public Service retired $50.0 million of 6.80%
interest. WPS Westwood Generation is now obligated to pay the refunding
first mortgage bonds that had reached maturity. Wisconsin Public Service
bonds with monthly payments that have a floating interest rate that
also called $9.1 million of 6.125% tax-exempt bonds in May 2003.
is reset weekly. At December 31, 2003, the interest rate was 1.10%.
In December 2003, Wisconsin Public Service issued $125.0 million of
The bonds mature in April 2021. WPS Resources agreed to guarantee
4.80% senior notes due December 2013. The senior notes are collateralized
WPS Westwood Generation’s obligation to provide sufficient funds to
by a pledge of first mortgage bonds and become non-collateralized if
pay the refunding bonds and the related obligations and indemnities.
Wisconsin Public Service retires all of its outstanding first mortgage bonds.
In November 2003, WPS Power Development retired all of the notes
In March 2003, Upper Peninsula Power retired $15.0 million of 7.94%
payable under a revolving credit note, in the amount of $12.5 million.
first mortgage bonds that had reached maturity. Upper Peninsula Power
The note was collateralized by the assets of the Stoneman plant and
is required to make bond sinking fund payments for some of its
was guaranteed by WPS Resources. Variable interest payments were
outstanding first mortgage bonds.
made quarterly during 2003.
Borrowings by WPS Power Development under term loans and
Upper Peninsula Power has a senior secured note of $2.9 million as of
collateralized by nonregulated assets totaled $87.2 million at December 31,
December 31, 2003, which requires semiannual payments at an interest
2003. The assets of WPS New England Generation, Inc. and WPS Canada
rate of 9.25%, and matures in 2011.
Generation, Inc., subsidiaries of WPS Power Development, collateralize
$5.8 million and $14.4 million, respectively, of the total outstanding At December 31, 2003, WPS Resources and its subsidiaries were in
amount. Both have semiannual installment payments, an interest rate of compliance with all covenants relating to outstanding debt. A schedule
8.75%, and mature in May 2010. Sunbury Generation, LLC, an indirect of all principal debt payment amounts, including bond maturities and
subsidiary of WPS Power Development, is the borrower of the remaining early retirements, for WPS Resources is as follows:
$67.0 million that is collateralized by its plant. Quarterly payments are
made in relation to this financing that carries an interest rate of 7.8725%
for the year ended December 31, 2003, and matures in March 2018. Year ending December 31 (Millions)
This loan also has renewals in 2006 and 2012. However, if certain debt 2004 $ 56.6
covenants are not met, the lender is not required to renew the loans. 2005 7.0
2006 7.7
In April 2001, the Schuylkill County Industrial Development Authority 2007 8.3
issued $27.0 million of refunding tax-exempt bonds. At the time of 2008 9.4
issuance of the refunding bonds, WPS Westwood Generation, LLC, a Later years 842.2
Total payments $931.2
subsidiary of WPS Power Development, owned the original bonds,
N OT E 1 5 — CO M PA N Y- O B L I G AT E D M A N DATO R I LY R E D E E M A B L E T R U ST
PREFERRED SECURITIES OF PREFERRED STOCK TRUST
On July 30, 1998, WPSR Capital Trust I, a Delaware business trust, issued been determined that the preferred security holders bear the majority of
$50.0 million of trust preferred securities to the public. WPS Resources owns the residual economic risks associated with WPSR Capital Trust I and,
all of the outstanding trust common securities of the Trust, and the only therefore, the Trust has been deconsolidated effective December 31, 2003.
asset of the Trust was $51.5 million of subordinated debentures issued by As a result of the deconsolidation, WPS Resources recorded a $1.5 million
WPS Resources. The debentures were due on June 30, 2038, and bore investment in trust within other current assets and a $51.5 million note
interest at 7% per year. The terms and interest payments on the debentures payable to preferred stock trust, respectively, within the Consolidated
correspond to the terms and distributions on the trust preferred securities. Balance Sheet at December 31, 2003. Prior periods have not been restated
per the transition provisions of Interpretation No. 46R. The Trust remains
As discussed in Note 1(V) – New Accounting Pronouncements, the
consolidated within the December 31, 2002, Consolidated Balance Sheet
provisions of Interpretation No. 46R were required to be applied to
and the interest payments on the debentures are reflected within interest
special purpose entities as of the end of the first reporting period ending
expense and distributions on trust preferred securities on the Consolidated
after December 15, 2003. It has been determined that WPSR Capital Trust I
Statements of Income for all years presented.
qualifies as a special purpose entity and; therefore, the provisions of
Interpretation No. 46R were applied to the Trust at December 31, 2003. On January 8, 2004, we redeemed all of the subordinated debentures
Prior to this date, we consolidated the preferred securities of the Trust that were initially issued to the Trust for $51.5 million and paid accrued
into our financial statements as we held all of the voting securities. interest of $0.1 million. This action required the Trust to redeem an equal
Per the provisions of Interpretation No. 46R, however, the voting interest amount of trust securities at face value plus any accrued interest and
approach is not effective in identifying controlling financial interests in unpaid distributions. As a result of these transactions, the Trust has
which the equity investor does not bear the residual economic risks. It has been dissolved effective January 8, 2004.
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NOTE 16—ASSET RETI REMENT OBLIGATIONS
Legal retirement obligations identified for the utility segments of
WPS Resources relate primarily to the final decommissioning of the (Millions) Utility Nonregulated Total
Kewaunee nuclear power plant. Wisconsin Public Service has a legal Asset retirement obligations
obligation to decommission the irradiated portions of the Kewaunee at December 31, 2002 $ – $ – $ –
nuclear power plant in accordance with the Nuclear Regulatory Liability recognized in transition 324.8 2.0 326.8
Accretion expense 19.2 0.1 19.3
Commission’s minimum decommissioning requirements. We have
Asset retirement obligation
also identified other legal retirement obligations related to utility plant at December 31, 2003 $344.0 $2.1 $346.1
assets that are not currently significant to the financial statements.
Upon implementation of Statement No. 143 on January 1, 2003, we The following pro forma liabilities reflect amounts relating to asset
recorded a net asset retirement cost of $90.8 million and an asset retirement obligations as if Statement No. 143 had been applied during
retirement obligation of $324.8 million. The difference between all periods presented:
previously recorded liabilities of $290.5 million and the cumulative
effect of adopting Statement No. 143 was deferred to a regulatory
liability pursuant to Statement No. 71. December 31, December 31, January 1,
(Millions) 2003 2002 2002
The nonregulated segments of WPS Resources have identified a legal Utility segments:
retirement obligation related to the closure of an ash basin located at Nuclear decommissioning $343.6 $324.4 $306.7
the Sunbury plant. Upon implementation of Statement No. 143, the Other 0.4 0.4 0.3
nonregulated segments of WPS Resources recorded an increase in net Nonregulated segments:
Ash basin facility 2.1 2.0 1.9
property, plant, and equipment of $1.4 million, a liability of $2.0 million,
and a cumulative effect of adoption after tax that reduced income
available for common shareholders by $0.3 million in the first Pro forma income available for common shareholders and earnings per
quarter of 2003. share have not been presented for the periods ended December 31, 2003,
2002, and 2001 because the pro forma application of Statement No. 143
See Note 6 – Acquisitions and Sales of Assets for information on the
to prior periods would result in pro forma income available for common
pending sales of the Sunbury plant and the Kewaunee nuclear power plant.
shareholders and earnings per share not materially different from the
The following table describes all changes to the asset retirement actual amounts reported for those periods in the Consolidated
obligation liabilities of WPS Resources: Statements of Income.
NOTE 17—I NCOME TAXES
The principal components of our deferred tax assets and liabilities recognized in the balance sheet as of December 31 are as follows:
(Millions) 2003 2002
Deferred tax assets
Plant related $ 70.5 $ 91.5
Deferred tax credit carry forwards 52.0 35.7
Employee benefits 28.7 45.0
State capital and operating loss carry forwards 10.9 7.9
Other comprehensive income 13.4 6.9
Risk management activities 6.9 (5.6)
Regulatory deferrals 3.4 1.6
Other 5.2 4.3
Total deferred tax assets 191.0 187.3
Valuation allowance (3.0) (0.6)
Net deferred tax assets $188.0 $186.7
Deferred tax liabilities
Plant related $233.3 $209.7
Employee benefits 16.1 38.2
Regulatory deferrals 8.7 6.7
Other comprehensive income 3.4 –
Other 7.0 5.8
Total deferred tax liabilities $268.5 $260.4
Net deferred tax liabilities $ 80.5 $ 73.7
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Valuation allowances have been established for certain state operating and The differences between income taxes determined by applying the
capital loss carry forwards, due to the uncertainty of the ability to benefit federal statutory rate to income before tax expense for the periods
from these losses in the future. Carry forward periods vary, but in the ended December 31 are as follows:
majority of states in which we do business the period is 15 years or more.
2003 2002 2001
(Millions, except for percentages) Rate Amount Rate Amount Rate Amount
Statutory federal income tax 35.0% $50.5 35.0% $51.5 35.0% $33.9
State income taxes, net 5.9 8.5 5.3 7.8 5.2 5.0
Plant related (0.8) (1.1) (1.6) (2.4) (3.3) (3.2)
ESOP dividend (1.0) (1.5) (1.0) (1.4) (0.1) (0.1)
Investment tax credit (1.2) (1.7) (1.2) (1.7) (1.8) (1.7)
Federal tax credits (13.1) (18.9) (16.4) (24.1) (23.0) (22.3)
Other differences, net (1.4) (2.1) (0.6) (1.0) (2.5) (2.4)
Effective income tax 23.4% $33.7 19.5% $28.7 9.5% $ 9.2
Current provision
Federal $18.3 $17.3 $33.8
State 14.0 11.1 8.4
Foreign 1.8 (0.4) –
Total current provision 34.1 28.0 42.2
Deferred provision (benefit) 2.8 3.2 (31.8)
Recognition of Net Operating Loss carryforward (1.5) (0.8) 0.5
Recognition of deferred investment tax credit (1.7) (1.7) (1.7)
Total income tax expense $33.7 $28.7 $ 9.2
Foreign income (loss) before taxes was $4.3 million in 2003 and for which deferred taxes were recorded in prior years at rates different
$(1.2) million in 2002. than current rates. The regulatory liability for these refunds and other
regulatory tax effects totaled $11.8 million as of December 31, 2003,
As the related temporary differences reverse, Wisconsin Public Service and
and $17.7 million as of December 31, 2002.
Upper Peninsula Power are prospectively refunding taxes to customers
NOTE 18—COMMITMENTS AND CONTINGENCIES
COM MO D I T Y A N D P U RC H A S E O R D E R COM M I TM E N TS WPS Resources also has commitments in the form of purchase orders
WPS Resources routinely enters into long-term purchase and sale issued to various vendors. At December 31, 2003, these purchase
commitments that have various quantity requirements and durations. orders totaled $168.8 million for WPS Resources and Wisconsin Public
Service committed $167.6 million of the total. The majority of these
WPS Energy Services has unconditional purchase obligations related to
commitments relate to large construction projects including the
energy supply contracts that total $2,136.0 million and extend through 2009.
construction of the 500-megawatt coal-fired generation facility near
The energy supply contracts at WPS Energy Services generally have
Wausau, Wisconsin.
offsetting energy sale contracts.
Wisconsin Public Service has obligations related to coal, purchased power, N U C L E A R P L A N T O P E R AT I O N
natural gas and nuclear fuel.Obligations related to coal supply extend through In accordance with Nuclear Regulatory Commission industry requirements,
2016 and total $321.4 million. Through 2015, Wisconsin Public Service has during the completed spring 2003 refueling outage, a visual inspection of
obligations totaling $395.6 million for either capacity or energy related to the Kewaunee nuclear power plant reactor vessel head was conducted.
purchased power. Also, there are natural gas supply and transportation There were no problems with the vessel head during the most recently
contracts with total estimated demand payments of $129.3 million completed operating cycle.
through 2010. Nuclear fuel contracts total $48.0 million.
After evaluating the cost of continued required inspections of the
Wisconsin Public Service expects to recover these costs in future customer existing reactor vessel head and the cost to replace the reactor vessel head,
rates. Additionally, Wisconsin Public Service has contracts to sell electricity the Kewaunee nuclear power plant owners submitted a construction
and natural gas to customers. Many of these contracts have indefinite lives. authorization request to the Public Service Commission of Wisconsin
WPS Power Development also enters into long-term commodity for replacement of the reactor vessel head. Approval of the request was
contracts, mainly related to the purchase of coal for the Sunbury plant. received in 2003. The replacement is scheduled to occur during the fall
The contracts total $1.8 million and extend through 2007. 2004 refueling outage at a cost of up to $14.2 million for Wisconsin
Public Service’s share of the project.
Upper Peninsula Power has made commitments for the purchase of
commodities, mainly capacity or energy related to purchased power, The Price Anderson Act ensures that funds will be available to pay
that total $20.6 million and extend through 2006. for public liability claims arising out of a nuclear incident. This Act
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Notes to Consolidated Financial Statements
may require Wisconsin Public Service to pay up to a maximum of In December 2000, Wisconsin Public Service received from the United
$59.4 million per incident. The payments will not exceed $5.9 million States Environmental Protection Agency a request for information under
per incident in a given calendar year. These amounts relate to Wisconsin Section 114 of the Clean Air Act. The United States Environmental
Public Service’s 59% ownership in the Kewaunee nuclear power plant. Protection Agency sought information and documents relating to work
performed on the coal-fired boilers located at the Pulliam and Weston
See Note 8 – Nuclear Plant Operation for detailed information on the
electric generating stations of Wisconsin Public Service. Wisconsin Public
operations of the Kewaunee nuclear power plant.
Service filed a response with the United States Environmental Protection
See Note 6 – Acquisitions and Sales of Assets for information on the Agency in early 2001.
pending sale of the Kewaunee nuclear power plant.
On May 22, 2002, Wisconsin Public Service received a follow-up request
C L E A N A I R R E G U L AT I O N S from the United States Environmental Protection Agency seeking
The United States Environmental Protection Agency has designated additional information regarding specific boiler-related work performed
southeastern Wisconsin as an ozone non-attainment area. Under the on Pulliam Units 3, 5 and 7, as well as information on Wisconsin Public
Clean Air Act, the State of Wisconsin developed a nitrogen oxide reduction Service’s life extension program for Pulliam Units 3-8 and Weston Units 1
plan for Wisconsin’s ozone non-attainment area. The nitrogen oxide and 2. Wisconsin Public Service made an initial response to the United
reductions began in 2003 and will gradually increase through 2007. States Environmental Protection Agency’s follow-up information request
Wisconsin Public Service owns 31.8% of Edgewater Unit 4, which is on June 12, 2002, and filed a final response on June 27, 2002.
located in the ozone non-attainment area. A compliance plan for this In 2000, 2001, and 2002, Wisconsin Power and Light Company received
unit was initiated in 2000. Wisconsin Public Service’s share of the costs a similar series of United States Environmental Protection Agency
of this project is expected to be approximately $5 million. The project is information requests relating to work performed on certain coal-fired
nearly complete. Wisconsin Public Service has incurred approximately boilers and related equipment at the Columbia generating station (a facility
$4.9 million on this project as of December 31, 2003. located in Portage, Wisconsin, jointly owned by Wisconsin Power and
The State of Wisconsin is also seeking voluntary reductions from Light Company, Madison Gas and Electric Company and Wisconsin Public
utility units outside the ozone non-attainment area, which may lead Service). Wisconsin Power and Light Company is the operator of the plant
to additional expenditures for nitrogen oxide reductions at other units. and is responsible for responding to governmental inquiries relating to the
Wisconsin Public Service is participating in voluntary efforts to reduce operation of the facility. Wisconsin Power and Light Company filed its
nitrogen oxide levels at the Columbia Energy Center. Wisconsin Public most recent response for the Columbia facility on July 12, 2002.
Service owns 31.8% of the Columbia facility. The Public Service Depending upon the results of the United States Environmental
Commission of Wisconsin has approved recovery of the costs Protection Agency’s review of the information, the United States
associated with voluntary nitrogen oxide reductions. Environmental Protection Agency may seek additional information from
Air quality modeling by the Wisconsin Department of Natural Resources Wisconsin Public Service and/or third parties who have information
revealed that Weston Units 1 and 2 contribute to a modeled exceedance relating to the boilers, close out the investigation or issue a “notice of
of the sulfur dioxide ambient air quality standard. Wisconsin Public violation” or “finding of violation” asserting that a violation of the Clean
Service expects that compliance with a future limit can be achieved by Air Act occurred. To date, the United States Environmental Protection
managing the coal supply quality and does not expect these changes to Agency has not responded to the 2002 follow-up filings made by
have a material impact on the operations of Wisconsin Public Service. Wisconsin Public Service and Wisconsin Power and Light Company.
Wisconsin Public Service is cooperating with the Wisconsin Department In response to the United States Environmental Protection Agency
of Natural Resources to develop an approach to resolve this issue. Clean Air Act enforcement initiative, several utilities elected to settle
with the United States Environmental Protection Agency, while others
U N I T E D S TAT E S E N V I R O N M E N TA L P R O T E C T I O N
are in litigation. In general, those utilities that settled entered into
AGENCY SECTION 114 R EQU EST
consent decrees which require the companies to pay fines and penalties,
In November 1999, the United States Environmental Protection Agency
undertake supplemental environmental projects and either upgrade or
announced the commencement of a Clean Air Act enforcement initiative
replace pollution controls at existing generating units or shut down
targeting the utility industry. This initiative resulted in the issuance of several
existing units and replace these units with new electric generating
notices of violation/findings of violation and the filing of lawsuits against
facilities. Several of the settlements involve multiple facilities. The fines
other unaffiliated utilities. In these enforcement proceedings, the United
and penalties (including the capital costs of supplemental environmental
States Environmental Protection Agency claims that the utilities made
projects) associated with these settlements range between $7 million
modifications to the coal-fired boilers and related equipment at the utilities’
and $30 million. Factors typically considered in settlements include,
electric generating stations without first obtaining appropriate permits under
but are not necessarily limited to, the size and number of facilities as
the United States Environmental Protection Agency’s pre-construction
well as the duration of alleged violations and the presence or absence
permit program and without installing appropriate air pollution control
of aggravating circumstances. The regulatory interpretations upon
equipment. In addition, the United States Environmental Protection
which the lawsuits or settlements are based may change based on
Agency is claiming, in certain situations, that there were violations of
future court decisions that may be rendered in pending litigations.
the Clean Air Act’s “new source performance standards.” In the matters
where actions have been commenced, the federal government is seeking
penalties and the installation of pollution control equipment.
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If the federal government decided to bring a claim against Wisconsin As to the Interstate Air Quality rule proposal, the proposal allows the
Public Service and if it were determined by a court that historic projects affected states (including Wisconsin) to either require utilities located
at the Pulliam and Weston electric generating stations required either in the state to participate in an interstate cap and trade program or meet
a state or federal Clean Air Act permit, Wisconsin Public Service may, the state’s emission budget for nitrogen oxides and sulfur dioxide through
under the applicable statutes, be required to: measures to be determined by the state. Wisconsin has not stated a
preference as to which option it would select in the event the rule
• shut down any unit found to be operating in non-compliance,
becomes final. While the effect of the rule on Wisconsin Public Service’s
• install additional pollution control equipment,
facilities is uncertain, for planning purposes it is assumed that additional
• pay a fine, and/or
expenditures for nitrogen oxide and sulfur dioxide controls will be
• pay a fine and conduct a supplemental environmental project
needed on existing units or the existing units will need to be converted
in order to resolve any such claim.
to natural gas by 2010. The installation of any controls and/or any
At the end of December 2002, the United States Environmental conversion to natural gas will need to be scheduled as part of
Protection Agency issued new rules governing the federal new source Wisconsin Public Service’s long-term maintenance plan for its existing
review program. The rules are not yet effective in Wisconsin. They are units. As such, controls or conversions may need to take place before the
also not retroactive. Wisconsin has proposed amending its new source proposed 2010 compliance date. On a preliminary basis and assuming
review program to substantially conform to the federal regulations. controls or conversion is required, Wisconsin Public Service estimates
The rules are anticipated to be finalized in the second half of 2004. a cost of $288 million in order to meet a 2010 compliance date. This
estimate is based on costs of current control technology.
M E R C U R Y A N D I N T E R S TAT E Q U A L I T Y R U L E S
The Wisconsin Department of Natural Resources initiated a rulemaking W P S P O W E R D E V E L O P M E N T G E N E R AT I O N F A C I L I T I E S
effort to control mercury emissions. Coal-fired generation plants are the The generation assets of WPS Power Development are subject to
primary targets of this effort. The proposed rule was open to comment in regulations on sulfur dioxide and nitrogen oxide emissions similar to those
October 2001. As proposed, the rule requires phased-in mercury emission that apply to Wisconsin Public Service. In addition, the Sunbury generation
reductions reaching 90% reduction in 15 years. Wisconsin Public Service facilities of WPS Power Development are located in an ozone transport
estimates that it could cost approximately $163 million to achieve the region. As a result, these generation facilities are subject to additional
proposed 90% reductions. Presently, the proposed rule is on hold, and restrictions on emissions of nitrogen oxide. Although WPS Power
it is uncertain if the state will proceed to finalize the regulations. Development has some emission allowances for 2004 for the Sunbury
facility, approximately 10,000 to 15,000 additional allowances may
In December 2003, the United States Environmental Protection Agency
need to be purchased, at market rates, to meet its 2004 requirements.
proposed mercury “maximum achievable control technology” standards
and an alternative mercury “cap and trade” program substantially modeled
on the Clear Skies legislation initiative. In addition, the United States
Environmental Protection Agency proposed the Interstate Air Quality rule,
which would reduce sulfur dioxide and nitrogen oxide emissions from
utility boilers located in 29 states, including Wisconsin. Wisconsin Public
Service is in the process of studying the proposed rules. As to the mercury
maximum achievable control technology proposal, it requires existing units
burning sub-bituminous coal to achieve an annual average mercury
emission rate limit of 5.8 pounds per trillion Btu on a unit-by-unit or plant-
wide basis. New units must achieve an emission rate limit of 0.020 pounds
per gigawatt-hour. If the proposed rule is promulgated, Wisconsin Public
Service’s current analysis indicates that the emission control equipment on
the existing units may be sufficient to achieve the proposed limitation.
New units will require additional mercury control techniques to reduce
mercury emissions by 65% to 85%. Mercury control technology is still in
development. Wisconsin Public Service is assessing potential mercury
control technologies for application to future new coal-fired units.
Wisconsin Public Service employees know the
meaning of teamwork. Here, Stevens Point, Wisconsin,
Line Electricians (top to bottom) Christopher Klingler,
Dale Kluetz, Todd Murphy, and Eric Ashenfelter work
together on energized 115 kilovolt transmission lines to
make repairs for American Transmission Company.
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Notes to Consolidated Financial Statements
Systems Analysts support the company’s software
and answer employees’ computer questions. Here,
Lori Wickman, Senior Systems Analyst, and James Frisch,
Systems Analyst, problem-solve in the Green Bay office.
cleanup of the land portion of the Oshkosh, Stevens Point, Green Bay,
and two Sheboygan sites was substantially complete. Groundwater
treatment and monitoring at these sites will continue into the future.
River sediment remains to be addressed at six sites with sediment
contamination. Wisconsin Public Service anticipates that remedial
investigation work will commence on the sediment portion of the
Sheboygan site in the first quarter of 2004. Sediment removal work
at the Marinette site is scheduled for the fall of 2004. Work at the
other sites remains to be scheduled.
Costs of these cleanups are within the range expected for these sites.
Wisconsin Public Service estimates future undiscounted investigation
and cleanup costs to be in the range of $36.2 million to $40.6 million.
C O L U M B I A ( J O I N T LY O W N E D G E N E R AT I O N F A C I L I T Y ) Wisconsin Public Service may adjust these estimates in the future
In the fourth quarter of 2003, the Wisconsin Environmental Law contingent upon remedial technology, regulatory requirements and
Advocates filed a complaint in the United States District Court for the assessment of natural resource damages. Wisconsin Public Service
the Western District of Wisconsin against Wisconsin Power and Light currently has a $36.2 million liability recorded for cleanup with an
Company and its parent, Alliant Energy Corporation, alleging violations offsetting regulatory asset (deferred charge). Wisconsin Public Service
of the federal Clean Water Act at the Columbia generating station has received $12.7 million in insurance recoveries that we recorded as a
(a facility jointly owned by Wisconsin Power and Light, Madison Gas reduction to the regulatory asset. Wisconsin Public Service expects to
and Electric Company and Wisconsin Public Service that is operated recover cleanup costs, net of insurance recoveries, in future customer rates.
by Wisconsin Power and Light). The complaint seeks certain upgrades Under current Public Service Commission of Wisconsin policies, Wisconsin
to the Columbia facility’s wastewater treatment program, as well as Public Service will not recover carrying costs associated with the cleanup
unspecified penalties and attorney fees. In addition, the Wisconsin expenditures. Wisconsin Public Service will include long-term operation
Department of Natural Resources has been pursuing enforcement of and maintenance costs associated with these sites in future rate requests.
this same matter and has recently referred the matter to the Wisconsin
FLOOD DAMAGE
Attorney General’s office. To date, no action has been filed or settlement
On May 14, 2003, a fuse plug at the Silver Lake reservoir owned by
demanded by the State of Wisconsin, however we expect a complaint
Upper Peninsula Power was breached. This breach resulted in subsequent
to be filed in due course. We believe that the total cost to resolve any
flooding downstream on the Dead River, which is located in Michigan’s
potential penalties in this matter will not be material.
Upper Peninsula near Marquette, Michigan.
O T H E R E N V I R O N M E N TA L I S S U E S A dam owned by Marquette Board of Light and Power, which is located
Groundwater testing at a former ash disposal site of Upper Peninsula downstream from the Silver Lake reservoir near the mouth of the Dead
Power indicated elevated levels of boron and lithium. Supplemental River, also failed during this event. In addition, high water conditions
remedial investigations were performed, and a revised remedial action and siltation resulted in damage at the Presque Isle Power Plant owned
plan was developed. The Michigan Department of Environmental Quality by Wisconsin Electric Power Company. Presque Isle, which is located
approved the plan in January 2003. A liability of $1.4 million and an downstream from the Marquette Board of Light and Power dam, was
associated regulatory asset of $1.4 million were recorded for estimated ultimately forced into a temporary shutdown.
future expenditures associated with remediation of the site. Upper
Peninsula Power received an order permitting deferral and future recovery The Federal Energy Regulatory Commission’s Independent Board of
of these costs. Upper Peninsula Power has an informal agreement, with Review issued its report in December of 2003 and concluded that the
the owner of another landfill, under which it has agreed to pay 17% of the root cause of the incident was the failure of the design to take into
investigation and remedial costs. It is estimated that the cost of addressing account the highly erodible nature of the fuse plug’s foundation materials
the site over the next three years is $1.7 million. Upper Peninsula Power and spillway channel, resulting in the complete loss of the fuse plug,
recorded 17% ($0.3 million) of this amount as a liability in December 2003. foundation and spillway channel which caused the release of Silver Lake
far beyond the intended design of the fuse plug. The fuse plug was
M A N U F A C T U R E D G A S P L A N T R E M E D I AT I O N designed for the Silver Lake reservoir by an outside engineering firm.
Wisconsin Public Service continues to investigate the environmental
WPS Resources maintains a comprehensive insurance program that
cleanup of ten manufactured gas plant sites. As of the fall of 2003,
includes Upper Peninsula Power and which provides both property
74 W PS R E S O U R C E S CO R P O R ATI O N

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insurance for its facilities and liability insurance for liability to third parties. synthetic fuel production facility, we have reduced our interest in the
WPS Resources is insured in amounts that it believes are sufficient to cover facility from 67% to 23% through sales to third parties (see Note 6 –
its responsibilities in connection with this event. Deductibles and self- Acquisitions and Sales of Assets). Our ability to fully utilize the Section 29
insured retentions on these policies are not material to WPS Resources. tax credits that remain available to us in connection with our remaining
interest in the facility will depend on whether the amount of our federal
In November 2003, Upper Peninsula Power received approval from the
income tax liability is sufficient to permit the use of such credits. The
Michigan Public Service Commission and the Federal Energy Regulatory
Internal Revenue Service strictly enforces compliance with all of the
Commission for deferral of costs that are not reimbursable through
technical requirements of Section 29. Section 29 tax credits are currently
insurance or recoverable through the power supply cost recovery
scheduled to expire at the end of 2007.
mechanism. Recovery of costs deferred will be addressed in future rate
proceedings. As of December 31, 2003, Upper Peninsula Power has On June 27, 2003, the Internal Revenue Service announced that it had
deferred $3.2 million pre-tax and expensed $1.0 million pre-tax of costs reason to question the scientific validity of certain test procedures and
for damages resulting from the flood. In addition, Upper Peninsula Power results that have been presented by certain taxpayers to qualify for
has recorded a $1.6 million insurance receivable at December 31, 2003. Section 29 tax credits. The Internal Revenue Service also announced
that it was reviewing information regarding these test procedures and
WAU SAU, W I S CO N S I N , TO D U LUTH , practices. However, on October 29, 2003, the Internal Revenue Service
M I N N E S O TA , T R A N S M I S S I O N L I N E announced that it had closed its investigation and concluded that such
Wisconsin Public Service, along with co-applicants Minnesota Power and tests and procedures were scientifically valid if properly applied and
American Transmission Company, continues to pursue the development indicated it would issue additional guidance on future sampling and
of the 220-mile, 345-kilovolt Wausau, Wisconsin, to Duluth, Minnesota, testing. WPS Resources believes that its synthetic fuel facility does
transmission line and expects the project to proceed despite opposition and will comply with such guidelines.
primarily from local landowners, the Citizens Utility Board, and
environmental groups. As a result of the June Internal Revenue Service announcement, on
August 1, 2003, WPS Resources received notice from the Internal Revenue
Under a recent agreement, American Transmission Company will Service that the WPS Resources’ affiliate through which it holds an
assume primary responsibility for the overall management of the project ownership interest in the synthetic fuel facility was under review for the
and will own and operate the completed line. Wisconsin Public Service 2001 tax period and that, depending upon the review of the affiliate’s 2001
received approval from the Public Service Commission of Wisconsin tax return, the Internal Revenue Service might reexamine the affiliate’s
and the Federal Energy Regulatory Commission to transfer ownership 2000 tax return. However, following the October announcement that the
of the project to the American Transmission Company. Wisconsin Public Internal Revenue Service was closing its investigation, WPS Resources
Service will continue to manage construction of the project and be responsible received preliminary notice in January 2004 that both audits have closed
for obtaining property rights in Wisconsin necessary for the construction without adjustment. Future years remain open to audit. We continue
of the project. As part of the ownership transfer, Wisconsin Public Service to believe that the facility has been operated in compliance with the
received approximately $20.1 million for the sale of its construction requirements of Section 29.
expenditures in June 2003.
The Permanent Subcommittee on Investigations of the Senate Committee
WPS Resources committed to fund 50% of total project costs incurred up on Governmental Affairs has been conducting an investigation of the
to $198 million, and receive additional equity in American Transmission synthetic fuel industry and their use of Section 29 tax credits. Pursuant
Company. In 2003, WPS Resources invested $14.0 million in American to its invitation, on January 30, 2004, we answered questions of the
Transmission Company, related to its agreement to fund approximately Committee regarding our synthetic fuel facility. It is not known when
half of the Wausau to Duluth transmission line. WPS Resources may the investigation will be completed and what impact, if any, such
terminate funding if the project extends beyond January 1, 2010. On investigation may have on future legislation or the enforcement policy
December 19, 2003, Wisconsin Public Service and American Transmission of the Internal Revenue Service.
Company received approval to continue the project with the new cost
estimates of $420.3 million. The updated cost estimate reflects additional We have recorded the tax benefit of approximately $81.3 million of
costs for the project resulting from time delays, added regulatory Section 29 tax credits as reductions of income tax expense from the
requirements, changes and additions to the project at the request of local project’s inception in June 1998 through December 31, 2003. As a result
governments and American Transmission Company’s management, and of alternative minimum tax rules, approximately $52.3 million of this tax
overhead costs. Completion of the line is expected in 2008. WPS Resources benefit has been carried forward as a deferred tax asset as of December 31,
has the right, but not the obligation, to provide additional funding in excess 2003. Future payments under one of the agreements covering the sale
of $198 million up to its portion of the revised cost estimate. For the period of a portion of our interest in the facility are contingent on the facility’s
2004 through 2006, we expect to make capital contributions of up to continued production of synthetic fuel. Any disallowance of some or all of
$128 million for our portion of the Wausau to Duluth transmission line. those tax credits would materially affect the related deferred tax account,
as well as, future tax obligations. Additionally, such disallowances may
SY N T H E T I C F U E L P R O D U C T I O N FA C I L I T Y result in a reduction of the level of synthetic fuel production at the facility,
We have significantly reduced our consolidated federal income tax thus reducing the likelihood and amount of future payments under that
liability for the past four years through tax credits available to us under agreement. Future tax legislation and Internal Revenue Service review may
Section 29 of the Internal Revenue Code for the production and sale of also affect the value of the credits and the value of our share of the facility.
solid synthetic fuel from coal. In order to maximize the value of our
W PS R E S O U R C E S CO R P O R ATI O N 75

Notes to Consolidated Financial Statements
NOTE 19—EMPLOYEE BENEFIT PLANS
WPS Resources has non-contributory qualified retirement plans covering The transition obligation for current and future retirees under Statement
substantially all employees under which we may make contributions to No. 106 is recognized over 20 years beginning in 1993. WPS Resources
an irrevocable trust. We established the plans to provide retired employees, uses a December 31 measurement date for the majority of its plans.
who meet conditions relating to age and length of service, with retirement
The recently enacted Medicare Prescription Drug, Improvement and
payments. As a result of the plans funding levels, no contributions were
Modernization Act of 2003 (the Act) provides a prescription drug benefit as
made to them in 2003, 2002, or 2001.
well as a federal subsidy to sponsors of certain retiree health care benefit
WPS Resources also currently offers medical, dental, and life insurance plans. The Act may impact our postretirement benefit obligations and
benefits to employees and their dependents. We expense these items future net periodic postretirement benefit costs, however, until regulations
for active employees as incurred. We fund benefits for retirees through necessary to implement the Act and specific accounting guidance are issued,
irrevocable trusts as allowed for income tax purposes. Wisconsin Public we cannot determine the benefit, if any, associated with the new law. We
Service and Upper Peninsula Power expensed and recovered through will continue to monitor the new regulations and may amend the plan in
customer rates the net periodic benefit cost. Our nonregulated subsidiaries order to benefit from the new legislation. Certain accounting issues raised
expensed allocated amounts. Our non-administrative plan is a collectively by the Act are not explicitly addressed by Statement No. 106. As a result,
bargained plan and, therefore, is tax exempt. The investments in the trust the Financial Accounting Standards Board issued FASB Staff Position (FSP)
covering administrative employees are subject to federal unrelated No. 106-1, “Accounting and Disclosure Requirements Related to Medicare
business income taxes at a 35% tax rate. Prescription Drug, Improvement and Modernization Act of 2003” which
allows the plan sponsor to elect to defer recognition of the effects of the
Wisconsin Public Service serves as plan sponsor for the qualified retirement
Act until authoritative guidance on the accounting for this Act is issued. As
plans and the postretirement plans and administers the plans. Accordingly,
allowed by FSP 106-1, WPS Resources has elected to defer recognition of
Wisconsin Public Service’s Consolidated Balance Sheets reflect the assets
the effects of the Act on the accumulated benefit obligation and net periodic
and liabilities associated with these plans. The net periodic benefit cost
postretirement benefit cost in these financial statements and accompanying
associated with the plans is allocated between WPS Resources’ subsidiaries.
notes. The Company’s deferral election expires upon the occurrence of any
Actuarial calculations are performed (based upon specific employees and
event that triggers a required remeasurement of plan assets or obligations,
their related years of service) in order to determine the appropriate
or upon the issuance of specific authoritative guidance on the accounting
benefit cost allocation.
for the federal subsidy. Such guidance is pending and when issued could
Pension costs are accounted for under Statement of Financial Accounting require the company to adjust previously reported information.
Standards No. 87, “Employers’ Accounting for Pensions.” Postretirement plan
The following tables provide a reconciliation of the changes in the plan’s
costs are accounted for under Statement of Financial Accounting Standards
benefit obligations and fair value of assets over the three one-year
No. 106, “Employers’ Accounting for Postretirement Benefits Other Than
periods ending December 31, 2003, 2002, and 2001, and a statement
Pensions.” The standards require the company to accrue the cost of these
of the funded status as of December 31 for each year:
benefits as expense over the period in which the employee renders service.
Pension Benefits Other Benefits
(Millions) 2003 2002 2001 2003 2002 2001
Reconciliation of benefit obligation
Obligation at January 1 $534.1 $495.2 $484.9 $ 234.3 $ 176.2 $102.6
Service cost 14.4 11.5 11.0 7.1 5.3 3.0
Interest cost 35.4 33.7 32.7 15.3 12.5 7.6
Plan amendments – – 0.2 (15.3) (4.7) –
Actuarial loss – net 61.4 26.2 35.4 49.5 52.5 65.5
Acquisitions – – 13.1 – – 3.7
Benefit payments (34.4) (32.5) (21.2) (9.3) (7.5) (6.2)
(Settlements)/curtailments – – (60.9) – – –
Obligation at December 31 $610.9$ $534.1 $495.2 $ 281.6 $ 234.3 $176.2
Reconciliation of fair value of plan assets
Fair value of plan assets at January 1 $511.6 $591.9 $676.1 $ 119.7 $ 134.7 $152.3
Actual return on plan assets 92.7 (47.8) (13.7) 23.7 (14.8) (4.4)
Employer contributions – – – 15.6 7.3 (7.0)
Acquisitions – – 18.1 – – –
Benefit payments (34.4) (32.5) (88.6) (9.3) (7.5) (6.2)
Fair value of plan assets at December 31 $569.9 $511.6 $591.9 $ 149.7 $ 119.7 $134.7
Funded status at December 31 $ (41.0) $ (22.5) $ 96.7 $(131.9) $(114.6) $ (41.5)
Unrecognized transition (asset) obligation – (0.2) (2.2) 3.8 13.1 14.4
Unrecognized prior-service cost 48.1 53.6 59.1 (21.5) (16.3) (12.9)
Unrecognized (gain) loss 67.8 53.2 (69.3) 99.7 66.0 (12.4)
Net asset (liability) recognized $ 74.9 $ 84.1 $ 84.3 $ (49.9) $ (51.8) $ (52.4)
76 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Amounts recognized in the Consolidated Balance Sheets relating
to the qualified benefit plans consist of: Pension Benefits Other Benefits
(Millions) 2003 2002 2003 2002
Prepaid benefit cost $ 67.9 $84.1 $ – $ –
Accrued benefit cost (64.9) – (49.9) (51.8)
Intangible assets 38.6 – – –
Regulatory asset 15.2 – – –
Accumulated other comprehensive income (before tax effect of $7.3 million) 18.1 – – –
Net asset (liability) recognized $ 74.9 $84.1 $(49.9) $(51.8)
The accumulated benefit obligation for the qualified defined benefit Information for qualified pension plans with an accumulated benefit
plans was $549.5 million at December 31, 2003, and $424.4 million obligation in excess of plan assets:
at December 31, 2002. December 31,
(Millions) 2003 2002
Projected benefit obligation $321.4 $–
Accumulated benefit obligation 315.1 –
Fair value of plan assets 250.2 –
The following table provides the components of net periodic benefit
cost (credit) for the plans for the years ended December 31, 2003,
2002, and 2001: Pension Benefits Other Benefits
(Millions) 2003 2002 2001 2003 2002 2001
Net periodic benefit cost
Service cost $ 14.4 $ 11.5 $11.0 $ 7.1 $ 5.3 $ 3.0
Interest cost 35.4 33.7 32.7 15.3 12.5 7.6
Expected return on plan assets (46.7) (47.7) (47.0) (10.6) (10.2) (9.7)
Amortization of transition (asset) obligation (0.2) (2.0) (3.5) 1.0 1.3 1.3
Amortization of prior-service cost (credit) 5.5 5.5 5.5 (2.2) (1.2) (1.2)
Amortization of net (gain) loss – (0.8) (2.3) 2.9 (1.2) (4.6)
Special termination benefits 0.8 – – – – –
Net periodic benefit cost (credit) before settlement/curtailment 9.2 0.2 (3.6) 13.5 6.5 (3.6)
(Settlement gain)/curtailment loss – – (12.7) – – –
Regulatory liability/(asset) offset – – 11.8 – – –
Amortization of settlement gain regulatory liability – (11.8) – – – –
Amortization of curtailment loss regulatory asset – 8.1 – – – –
Net periodic benefit cost (credit) $ 9.2 $ (3.5) $ (4.5) $ 13.5 $ 6.5 $(3.6)
Net periodic benefit cost (credit) recorded by Wisconsin Public Service Plans and for Termination Benefits.” Most of the 2000 curtailment loss
related to pension benefits was $3.7 million in 2003, $(7.2) million in was deferred as a regulatory asset.
2002, and $(7.4) million in 2001. Net periodic benefit cost (credit)
For the reasons mentioned above, large numbers of lump sum payments
recorded by Wisconsin Public Service related to other benefits was
were paid out of the pension plan during the course of 2001. This
$11.9 million in 2003, $4.7 million in 2002, and $(5.5) million in 2001.
required settlement accounting under Statement No. 88. Most of the
During 2000, WPS Resources made substantial changes to the settlement gain was deferred as a regulatory liability.
administrative employees’ portion of the pension and postretirement
Based on a rate order received from the Public Service Commission of
benefit plans. Effective January 1, 2001, the administrative employees’
Wisconsin, during 2002 Wisconsin Public Service amortized the entire
pension plan was changed to a pension equity plan with a lump sum
regulatory asset and regulatory liability relating to the aforementioned
distribution option for all future retirees. Additionally, all future
curtailment loss and settlement gain.
administrative retirees will no longer be given subsidized postretirement
medical and dental coverage. Due to employees who waited until 2001 At December 31, 2003, WPS Resources had to record a minimum
to retire to take advantage of the new plan benefits and various pension liability adjustment related to its large qualified Administrative
reorganizations, including the formation of Nuclear Management Employees’ Retirement Plan. Part of that minimum pension liability
Company, LLC, a significant number of employees left our pension plan adjustment was a charge to other comprehensive income. WPS Resources
in early 2001. This required curtailment accounting for the year 2000 determined that the portion of what normally would have been charged
under Statement of Financial Accounting Standards No. 88, “Employers’ to other comprehensive income that related to the regulated portion of
Accounting for Settlements and Curtailments of Defined Benefit Pension our operations should be recorded as a regulatory asset.
W PS R E S O U R C E S CO R P O R ATI O N 77

Notes to Consolidated Financial Statements
ASSUMPTIONS Pension Benefits Other Benefits
Weighted average assumptions used to determine
benefit obligations at December 31 2003 2002 2001 2003 2002 2001
Discount rate 6.25% 6.75% 7.25% 6.25% 6.75% 7.25%
Rate of compensation increase 5.50% 5.50% 5.50% – – –
Weighted average assumptions used to determine
net periodic benefit cost for years ended December 31 2003 2002 2001 2003 2002 2001
Discount rate 6.75% 7.25% 7.50% 6.75% 7.25% 7.50%
Expected return on plan assets 8.75% 8.75% 8.75% 8.75% 8.75% 8.75%
Rate of compensation increase 5.50% 5.50% 5.50% – – –
To develop the 8.75% expected long-term rate of return on assets, The Board of Directors has established the Employee Benefits
WPS Resources considered the historical returns and the future Administrator Committee to manage the operations and administration
expectations for returns for each asset class, as well as the target of all benefit plans and related trusts. The Committee has an investment
allocation of the benefit trust portfolios. policy for the Pension Plan assets that establishes target asset allocations
for the above listed asset classes as follows: Equity securities 60%,
The assumptions used for WPS Resources’ medical and dental cost
Debt securities 35%, and Real estate 5%. The Committee is committed
trend rates are shown in the following table:
to diversification to reduce the risk of large losses. To that end the
Committee has adopted policies requiring that each asset class will be
2003 2002 2001 diversified, multiple managers with differing styles of management
Assumed medical cost trend will be employed, and equity exposure will be limited to 70% of the
rate (under age 65) 11.0% 12.0% 10.0% total portfolio value. On a quarterly basis, the Committee reviews
Ultimate trend rate 5.0% 5.0% 5.0% progress towards achieving the performance objectives of the pension
Ultimate trend rate reached in 2011 2011 2008 plans and the individual managers.
Assumed medical cost trend WPS Resources postretirement benefit plans weighted-average asset
rate (over age 65) 13.0% 14.0% 12.0%
allocations at December 31, 2003, and 2002, by asset category are
Ultimate trend rate 6.5% 6.5% 6.5%
Ultimate trend rate reached in 2011 2011 2008 as follows:
Assumed dental cost trend rate 5.0% 6.0% 7.0%
Ultimate trend rate 5.0% 5.0% 5.0% Plan Assets at December 31 2003 2002
Ultimate trend rate reached in 2004 2004 2004 Asset category
Equity securities 63% 57%
Assumed health care cost trend rates have a significant effect on the Debt securities 27% 36%
amounts reported for the health care plans. A 1% change in assumed Real estate 0% 0%
Other 10% 7%
health care cost trend rates would have the following effects: Total 100% 100%
(Millions) 1% Increase 1% Decrease The Employee Benefits Administrator Committee has an investment
Effect on total of service and interest cost policy for the postretirement plans’ assets that establishes target asset
components of net periodic postretirement allocations for the above listed asset classes as follows: Equity securities
health care benefit cost $ 3.9 $ (3.5) 65% and Debt securities 35%. The Committee is committed to
Effect on the health care component of the diversification to reduce the risk of large losses. To that end, the
accumulated postretirement benefit obligation $48.6 $(37.4) Committee has adopted policies requiring that each asset class will
be diversified, multiple managers with differing styles of management
PLAN ASSETS will be employed, and equity exposure will be limited to 70% of the
WPS Resources pension plans weighted-average asset allocations at total portfolio value. On a quarterly basis, the Committee reviews
December 31, 2003, and 2002, by asset category are as follows: progress towards achieving the performance objectives of the other
postretirement plans and the individual managers.
Plan Assets at December 31 2003 2002
Asset category C A S H F LO W S
Equity securities 61% 54% WPS Resources expects to contribute $1.6 million to its pension plans
Debt securities 35% 40% and $18.7 million to its other postretirement benefit plans in 2004.
Real estate 3% 4%
Other 1% 2%
Total 100% 100%
78 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
N O N Q UA L I F I E D P L A N S held 2.1 million shares of WPS Resources common stock (market value
WPS Resources sponsors several non-qualified pension plans covering of approximately $96 million) at December 31, 2003. Total costs
certain current and former employees. These non-qualified pension incurred under these plans were $5.7 million in 2003, $4.8 million in
plans are not funded. WPS Resources’ projected benefit obligation under 2002, and $4.5 million in 2001. Wisconsin Public Service’s share of
these plans was $26.3 million at December 31, 2003, $19.7 million at the total costs was $4.6 million in 2003, $3.9 million in 2002, and
December 31, 2002, and $17.9 million at December 31, 2001. The $3.8 million in 2001.
weighted average assumptions used to determine benefit obligations
WPS Resources maintains a deferred compensation plan that enables
and net periodic benefit cost for the non-qualified plans are the same
certain key employees and non-employee directors to defer a portion
as the assumptions disclosed above for the qualified plans. Amounts
of their compensation or fees on a pre-tax basis. Key employees can
recognized in the Consolidated Balance Sheets related to the
defer up to 75% of their base compensation and up to 100% of any
non-qualified pension plans are as follows:
incentive awards. Non-employee directors can defer up to 100% of
their director fees. There are essentially two separate investment
(Millions) 2003 2002 programs available to plan participants, allowing them to direct the
investment of deferrals into various investment fund equivalents offered
Accrued benefit cost $(22.9) $(18.8) by the plan. The first program (“Program 1”) offers WPS Resources
Intangible assets 2.9 3.5
Accumulated other comprehensive income common stock as a hypothetical investment option for participants;
(before tax effect of $2.7million in 2003 and deemed dividends paid on the common stock are automatically
$1.8 million in 2002) 6.8 4.5 reinvested; and all distributions must be made in WPS Resources
Net liability recognized $(13.2) $(10.8) common stock. The second program (“Program 2”) offers a variety
of hypothetical investment options indexed to mutual funds,
With the exception of Upper Peninsula Power’s Supplemental Early WPS Resources return on equity and WPS Resources common stock.
Retirement Plan, the assets and liabilities related to the non-qualified Participants may not redirect investments between the two programs.
pension plans are recorded on the Consolidated Balance Sheets of All employee deferrals are remitted to Wisconsin Public Service and,
Wisconsin Public Service. The net periodic benefit cost is allocated therefore, the liabilities and costs associated with the deferred
to WPS Resources’ subsidiaries in a similar manner to the qualified compensation plans are included on Wisconsin Public Service’s
retirement plans, as discussed above. Included in the table above is Consolidated Balance Sheets and Consolidated Statements of
an accrued benefit cost of $1.8 million at December 31, 2003, and Income, respectively.
2002 related to Upper Peninsula Power’s Supplemental Early
Program 1 is accounted for as a plan that does not permit diversification.
Retirement Plan.
As a result, the deferred compensation arrangement is classified as
WPS Resources’ net periodic benefit cost under these plans was an equity instrument and changes in the fair value of the deferred
$3.5 million in 2003, $2.4 million in 2002, and $2 million in 2001. compensation obligation are not recognized. The deferred compensation
The net periodic benefit costs allocated to Wisconsin Public Service obligation associated with Program 1 was $10.3 million at December 31,
under these plans was $2.8 million in 2003, $2.1 million in 2002, and 2003, and $8.8 million at December 31, 2002.
$1.7 million in 2001. The accumulated benefit obligation for these
Program 2 is accounted for as a plan that permits diversification.
plans has risen due to recent plan design changes and the decline
As a result, the deferred compensation obligation associated with this
in the discount rate used to estimate the plans’ liability. Therefore,
program is classified as a liability in the Consolidated Balance Sheets
WPS Resources was required to adjust the minimum pension liability
and adjusted, with a charge or credit to expense, to reflect changes in
recorded on the December 31, 2003, Consolidated Balance Sheet.
the fair value of the deferred compensation obligation. The obligation,
Because these adjustments were non-cash, their effect has been excluded
classified within other long-term liabilities was $18.7 million at
from the accompanying Consolidated Statement of Cash Flows.
December 31, 2003, and $16.0 million at December 31, 2002. The
DEFINED CONTRIBUTION BENEFIT PLANS cost incurred under Program 2 was $2.4 million in 2003, $1.6 million
WPS Resources maintains a 401(k) Savings Plan for substantially all in 2002, and $1.4 million in 2001.
full-time employees. Employees generally may contribute from 1% The deferred compensation programs are partially funded through
to 30% of their base compensation to individual accounts within the WPS Resources common stock that is held in a rabbi trust. The common
401(k) Savings Plan. Participation in this plan automatically qualifies stock held in the rabbi trust is classified in equity in a manner similar to
eligible non-union employees for participation in the Employee Stock accounting for treasury stock. The total cost of WPS Resources common
Ownership Plan (“ESOP”). The company match, in the form of stock held in the rabbi trust was $6.5 million at December 31, 2003,
WPS Resources shares of common stock, is contributed to an employee’s and $5.4 million at December 31, 2002.
ESOP account. The plan requires a match equivalent to 100% of the
first 4% and 50% of the next 2% contributed by non-union employees.
Certain union employees receive a contribution to their ESOP account
regardless of their participation in the 401(k) Savings Plan. The ESOP
W PS R E S O U R C E S CO R P O R ATI O N 79

Notes to Consolidated Financial Statements
NOTE 20—PREFERRED STOCK OF SUBSIDIARY
Wisconsin Public Service has issued preferred stock with no mandatory redemption and a $100 par value. The following table shows the shares
outstanding of the 1,000,000 shares authorized:
Shares
(Millions, except share amounts) Series Outstanding 2003 2002
5.00% 132,000 $13.2 $13.2
5.04% 30,000 3.0 3.0
5.08% 50,000 5.0 5.0
6.76% 150,000 15.0 15.0
6.88% 150,000 15.0 15.0
Total 512,000 $51.2 $51.2
All shares of preferred stock of all series constitute one class and are of preferred stock out of the corporate assets other than profits before any
equal rank except as to dividend rates and redemption terms. Payment of such assets are paid or distributed to the holders of common stock and
of dividends from any earned surplus or other available surplus is not (b) the amount of dividends accumulated and unpaid on their preferred
restricted by the terms of any indenture or other undertaking by stock out of the surplus or net profits before any of such surplus or net
Wisconsin Public Service. Each series of outstanding preferred stock profits are paid to the holders of common stock. Thereafter, the remainder
is redeemable in whole or in part at Wisconsin Public Service’s option of the corporate assets, surplus and net profits shall be paid to the holders
at any time on 30 days’ notice at the respective redemption prices. of common stock.
Wisconsin Public Service may not redeem less than all, nor purchase
The preferred stock has no pre-emptive, subscription or conversion
any, of its preferred stock during the existence of any dividend default.
rights, and has no sinking fund provisions.
In the event of Wisconsin Public Service’s dissolution or liquidation, the
holders of preferred stock are entitled to receive (a) the par value of their
NOTE 21—COMMON EQUITY
Effective January 2001, we began issuing new stock under our Stock
Shares outstanding at December 31 2003 2002 Investment Plan and under certain of our stock-based employee benefit
Common stock, $1 par value, plans. These stock issues increased equity $31.0 million in 2003 and
200,000,000 shares authorized 36,830,556 32,040,875 $28.3 million in 2002. WPS Resources also repurchased $1.1 million of
Treasury stock 15,700 65,650 existing common stock for stock-based compensation plans in 2003.
Average cost of treasury shares $25.19 $23.62
Shares in deferred compensation rabbi trust 192,880 166,446
Average cost of deferred compensation Common Stock
rabbi trust shares $33.72 $32.29 Reconciliation of Common Shares Shares Outstanding
Balance at December 31, 2000 26,409,470
As part of a merger with Wisconsin Fuel and Light into Wisconsin Common stock offering 2,300,000
Public Service, 1,763,871 shares of common stock were issued on Wisconsin Fuel and Light Merger 1,763,871
April 1, 2001, to former Wisconsin Fuel and Light shareholders. Stock issued for Stock Incentive Plan and other
stock-based employee benefit plans 581,392
On December 17, 2001, 2,300,000 shares of WPS Resources common Stock issued from Treasury Stock 29,333
stock were issued at $34.36 per share and resulted in a net increase Stock repurchased for stock-based compensation plans (30,816)
in equity of $76.0 million. Balance at December 31, 2001 31,053,250
Stock Incentive Plan and other stock-based
On November 24, 2003, 4,025,000 shares of WPS Resources common employee benefit plans 544,578
stock were issued at $43.00 per share and resulted in a net increase Stock issued from Treasury Stock 241,402
in equity of $166.8 million. Stock repurchased for stock-based compensation plans (30,451)
Balance at December 31, 2002 31,808,779
Treasury shares at December 31, 2003, relate to our Non-Employee Common stock offering 4,025,000
Directors Stock Option Plan. The number of stock options granted Stock Incentive Plan and other stock-based employee
under this plan may not exceed 100,000 shares. All options under this benefit plans 764,681
plan have a ten-year life, but may not be exercised until one year after Stock issued from Treasury Stock 49,950
Stock repurchased for stock-based compensation plans (26,434)
the date of grant.
Balance at December 31, 2003 36,621,976
80 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
In December 1996, we adopted a Shareholder Rights Plan. The plan is of all potentially dilutive securities. Such dilutive items include in-the-money
designed to enhance the ability of the Board of Directors to protect stock options and performance share grants. The calculation of diluted
shareholders and WPS Resources if efforts are made to gain control of earnings per share for the years shown excludes some stock option plan
our company in a manner that is not in our best interests or the best shares that had an anti-dilutive effect. The shares having an anti-dilutive
interests of our shareholders. The plan gives our existing shareholders, effect are not significant for any of the years shown. The following table
under certain circumstances, the right to purchase stock at a discounted reconciles the computation of basic and diluted earnings per share:
price. The rights expire on December 11, 2006.
At December 31, 2003, we had $416.1 million of retained earnings Reconciliation of Earnings Per Share
available for dividends. (Millions, except per share amounts) 2003 2002 2001
Earnings per share is computed by dividing income available for common Income available for common
shareholders $94.7 $109.4 $77.6
shareholders for the period by the weighted average number of shares of Basic weighted average shares 33.0 31.7 28.2
common stock outstanding during the period. Diluted earnings per share Incremental issuable shares 0.2 0.3 0.1
is computed by dividing income available for common shareholders for Diluted weighted average shares 33.2 32.0 28.3
the period by the weighted average number of shares of common stock Basic earnings per common share $2.87 $3.45 $2.75
outstanding during the period adjusted for the exercise and/or conversion Diluted earnings per common share $2.85 $3.42 $2.74
NOTE 22—STOCK OPTION PLANS
In 2001, shareholders approved the WPS Resources Corporation 2001 prices of $38.25 and $44.73, respectively. The stock options vest and
Omnibus Incentive Compensation Plan for certain management become exercisable in equal 25% installments over a four-year period.
personnel. In 1999, shareholders approved the WPS Resources
The number of stock options granted under the 1999 Non-Employee
Corporation 1999 Stock Option Plan for certain management personnel.
Directors Stock Option Plan may not exceed 100,000, and the shares
In December 1999, the Board of Directors approved the WPS Resources
issued thereunder must consist solely of treasury shares. Stock options
Corporation 1999 Non-Employee Directors Stock Option Plan.
are granted at the discretion of the Board of Directors. No options may
Under the provisions of the 2001 Omnibus Incentive Compensation Plan, be granted under this plan after December 31, 2008. All options have a
the number of shares for which stock options may be granted may not ten-year life, but may not be exercised until one year after the date of
exceed 2 million, and no single employee that is the chief executive officer grant. Options granted under this plan are immediately vested. The
of WPS Resources or any of the other four highest compensated officers exercise price of each option is equal to the fair market value of the
of WPS Resources or its subsidiaries can be granted options for more stock on the date the stock options were granted. Options were granted
than 150,000 shares during any calendar year. Under the provisions of on December 9, 1999, and February 10, 2000, with exercise prices
the WPS Resources Corporation 1999 Stock Option Plan, the number of of $25.4375 and $25.6875, respectively. No additional stock options
shares for which options may be granted may not exceed 1.5 million and are expected to be issued under this plan.
no single employee can be granted options for more than 400,000 shares
The number of shares subject to each stock option plan, each outstanding
during any five-year period. No additional stock options will be issued
stock option, and stock option exercise prices are subject to adjustment in
under the 1999 Stock Option Plan, although the plan will continue to exist
the event of any stock split, stock dividend, or other transaction affecting
for purposes of the existing outstanding options. Stock options are granted
our outstanding common stock.
by the Compensation Committee of the Board of Directors and may be
granted at any time. No stock options will have a term longer than ten The fair value of each stock option grant was estimated using the
years. The exercise price of each stock option is equal to the fair market Black-Scholes stock option pricing model and the following assumptions
value of the stock on the date the stock option was granted. for each grant date.
Stock options were granted under the 1999 Stock Option Plan on
February 11, 1999 (subject to shareholder approval of the 1999 Stock
Annual Expected Risk-Free
Option Plan that was received on May 6, 1999, at which time the Dividend Yield Volatility Interest Rate
exercise price was established for the initial grant), March 13, 2000,
and December 14, 2000, with exercise prices of $29.875, $23.1875, and July 12, 2001 6.58% 20.93% 5.54%
$34.75, respectively. During 2001, stock options were granted under the December 13, 2001 6.60% 20.19% 5.62%
January 28, 2002 6.60% 20.53% 5.40%
2001 Omnibus Plan on July 12 and December 13, with exercise prices April 11, 2002 6.58% 19.53% 5.57%
of $34.38 and $34.09, respectively. During 2002, stock options were December 12, 2002 6.23% 20.08% 4.43%
granted under the 2001 Omnibus Plan on January 28, April 11, and February 10, 2003 6.23% 19.97% 4.40%
December 12, with exercise prices of $36.38, $41.29, and $37.96, December 10, 2003 5.68% 18.25% 4.65%
respectively. In 2003, stock options were granted under the 2001
Expected life (in years) 10
Omnibus Plan on February 10 and December 10, having exercise
W PS R E S O U R C E S CO R P O R ATI O N 81

Notes to Consolidated Financial Statements
A summary of the status of the stock option plans as of December 31, 2003, is presented below:
Weighted-
Average
Exercise
Stock Options Shares Price
Options outstanding at beginning of year
Omnibus plan 663,548 $36.1131
Employee plan 492,021 31.5572
Director plan 19,400 25.4762
Granted during 2003
Omnibus plan 335,424 44.5601
Exercised during 2003
Omnibus plan 4,420 34.6538
Employee plan 207,150 29.4879
Director plan 3,700 25.4375
Forfeited during 2003
Omnibus plan 875 36.3014
Employee plan 1,250 23.1875
Outstanding at end of year
Omnibus plan 993,677 38.9707
Employee plan 283,621 33.1055
Director plan 15,700 25.4853
Options exercisable at year-end
Omnibus plan 241,076 35.4684
Employee plan 225,116 33.0890
Director plan 15,700 25.4852
Weighted-average fair value of options granted during 2003
Omnibus plan $4.53
A summary of the status of the stock option plans as of December 31, 2002, is presented below:
Weighted-
Average
Exercise
Stock Options Shares Price
Options outstanding at beginning of year
Omnibus plan 327,427 $34.1038
Employee plan 705,916 30.9806
Director plan 23,150 25.4699
Granted during 2002
Omnibus plan 341,613 38.0064
Exercised during 2002
Employee plan 206,849 29.5512
Director plan 3,750 25.4375
Forfeited during 2002
Omnibus plan 5,492 34.0900
Employee plan 7,046 32.6744
Outstanding at end of year
Omnibus plan 663,548 36.1131
Employee plan 492,021 31.5572
Director plan 19,400 25.4762
Options exercisable at year-end
Omnibus plan 80,484 34.1040
Employee plan 256,011 31.6679
Director plan 19,400 25.4762
Weighted-average fair value of options granted during 2002
Omnibus plan $3.64
82 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
A summary of the status of the stock option plans as of December 31, 2001, is presented below:
Weighted-
Average
Exercise
Stock Options Shares Price
Options outstanding at beginning of year
Omnibus plan – –
Employee plan 722,416 $30.9322
Director plan 24,000 25.4688
Granted during 2001
Omnibus plan 327,427 34.1038
Exercised during 2001
Employee plan 16,500 28.8617
Director plan 850 25.4375
Forfeited during 2001 – –
Outstanding at end of year
Omnibus plan 327,427 34.1038
Employee plan 705,916 30.9806
Director plan 23,150 25.4699
Options exercisable at year-end
Employee plan 283,604 30.6072
Director plan 23,150 25.4699
Weighted-average fair value of options granted during 2001
Omnibus plan $3.23
The following table summarizes the status of the stock options outstanding and exercisable at December 31, 2003, under the 2001 Omnibus Plan.
Weighted-Average
Weighted-Average Weighted-Average Remaining Contractual Life
Exercise Prices Options Outstanding Exercise Price Options Exercisable Exercise Price (in Years)
$34.0900 303,223 $34.0900 150,042 $34.0900 8
34.3800 14,479 34.3800 6,693 34.3800 8
36.3800 500 36.3800 125 36.3800 8
37.9600 335,051 37.9600 82,966 37.9600 8
41.2900 5,000 41.2900 1,250 41.2900 8
38.2500 8,797 38.2500 – – 10
44.7300 326,627 44.7300 – – 10
993,677 $38.9707 241,076 $35.4684
The following table summarizes the status of the stock options outstanding and exercisable at December 31, 2003, under the 1999 Stock Option Plan.
Weighted-Average
Weighted-Average Weighted-Average Remaining Contractual Life
Exercise Prices Options Outstanding Exercise Price Options Exercisable Exercise Price (in Years)
$29.8750 76,700 $29.8750 76,700 $29.8750 6
23.1875 8,000 23.1875 – – 6
34.7500 198,921 34.7500 148,416 34.7500 7
283,621 $33.1055 225,116 $33.0890
The following table summarizes the status of the stock options outstanding and exercisable at December 31, 2003, under the 1999 Non-Employee
Director Stock Option Plan.
Options Weighted-Average
Outstanding Weighted-Average RemainingContractualLife
Exercise Prices and Exercisable Exercise Price (in Years)
$25.4375 12,700 $25.4375 6
25.6875 3,000 25.6875 6
15,700 $25.4852
W PS R E S O U R C E S CO R P O R ATI O N 83

Notes to Consolidated Financial Statements
In the Oshkosh, Wisconsin,
warehouse, Ket Vongsa, Supply
Clerk, keeps an eye on inventory
levels for Wisconsin Public Service.
NOTE 23—REGU LATORY ENVI RONMENT
WISCONSIN of the De Pere Energy Center, fuel costs, maintenance of power
Effective March 21, 2003, Wisconsin Public Service received approval to production facilities and employee benefits. On December 19, 2003, the
increase Wisconsin retail electric rates $21.4 million (3.5%) and decrease Public Service Commission of Wisconsin issued a final written order
Wisconsin retail natural gas rates $1.2 million (0.3%). The new retail authorizing a retail electric rate increase of $59.4 million (9.4%) and a
electric and natural gas rates reflect a 12.0% return on equity and allowed retail natural gas rate increase of $8.9 million (2.2%), effective January 1,
average equity of 55% of total capital. 2004. The new rates reflect a 12.0% return on equity and allowed
average equity of 56% of total capital.
The amount of fuel and purchased power costs Wisconsin Public Service
is authorized to recover in rates is established in the general rate filing. If
the actual fuel and purchased power costs vary from the authorized level MICH IGAN
by more than 2% on an annual basis, Wisconsin Public Service is allowed, Wisconsin Public Service filed for an increase in retail electric rates in the
or may be required, to file an application adjusting rates for the remainder first quarter of 2003. On July 21, the Michigan Public Service Commission
of the year to reflect actual costs for the year to date and updated authorized an increase in retail electric rates of $0.3 million and the
projected costs. On October 29, 2003, Wisconsin Public Service filed to recovery of an additional $1.0 million of transmission costs through the
reduce rates by $1.9 million, due to a reduction in the costs of fuel and power supply cost recovery mechanism, effective July 22, 2003.
purchased power, for the period August 15, 2003, through December 31, On December 20, 2002, the Michigan Public Service Commission
2003. On February 19, 2004, the Public Service Commission of Wisconsin approved an 8.95% increase in retail electric rates for customers of
approved a refund of $2.7 million, which represents the originally filed Upper Peninsula Power. The Michigan Public Service Commission
amounts, adjustments and interest. This refund will be credited to granted an 11.4% return on equity with the new rates being effective
customer accounts in March 2004. A liability of $2.6 million was accrued December 21, 2002. This was the first base rate increase for Upper
as of December 31, 2003, in anticipation of this refund. Peninsula Power in 10 years.
As a result of the Kewaunee nuclear power plant unplanned outage in Michigan authorizes a one-for-one fuel and purchased power recovery
late January and early February 2004, and other fuel cost increases in mechanism for prudently incurred costs. Under the mechanism, the
2004, Wisconsin Public Service filed for a fuel cost increase of $7.4 million difference between actual and authorized fuel and purchased power costs
on February 27, 2004. The Public Service Commission of Wisconsin has is deferred until year-end. By March 31 of the following year, the utility
scheduled a hearing for March 22, 2004, to determine the amount of the must file a reconciliation of the actual costs to the authorized costs. Any
fuel cost increase to be recorded on an interim basis. Wisconsin Public under or over recovery is then recovered from or returned to ratepayers
Service expects that a final order will be issued in summer 2004 regarding through the end of the following year. The reconciliation is subject to
this rate increase. review and intervention by customers. At December 31, 2003, Upper
On April 1, 2003, Wisconsin Public Service filed an application with the Peninsula Power had significantly under recovered fuel and purchased
Public Service Commission of Wisconsin for authorization to increase power costs due to the high costs of purchased power. Upper Peninsula
electric rates and natural gas rates, effective January 1, 2004. The rate Power intends to file, in March 2004, a reconciliation of the 2003 costs
increases are necessary to recover the costs associated with the purchase requesting recovery of $5.2 million. In addition, the costs associated with
the Presque Isle Power Plant outage have been deferred and are expected
84 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
to be addressed along with other Dead Flood issues in the next rate case. increase is less. The draft order also granted the use of formula rates,
Upper Peninsula Power expects a final decision regarding the recovery which allow for the adjustment of wholesale electric rates to reflect actual
of the 2003 fuel costs no later than the end of 2004. Due to the level of costs without having to file additional rate requests. On March 4, 2004,
the under recovery relative to Upper Peninsula Power’s revenues, the the Federal Energy Regulatory Commission and Wisconsin Public Service
deferred cost may be recovered over more than one year. reached a tentative settlement regarding the final rate increase. Wisconsin
Public Service anticipates no material refunds or other adjustments to
FEDERAL revenues recorded under the interim rates based on the terms of the
On April 30, 2003, Wisconsin Public Service received a draft order from the tentative agreement. The final settlement is anticipated to be filed with
Federal Energy Regulatory Commission approving a 21%, or $4.1 million, the Federal Energy Regulatory Commission in the second quarter of 2004.
interim increase in wholesale electric rates. The new wholesale rates This was Wisconsin Public Service’s first rate increase for its wholesale
were effective on May 11, 2003, and are subject to refund if the final rate electric customers in 17 years.
NOTE 24—SEGMENTS OF BUSINESS
We manage our reportable segments separately due to their different cooperatives, commercial and industrial consumers, aggregators, and
operating and regulatory environments. other marketing and retail entities.
Our principal business segments are the regulated electric utility operations WPS Power Development competes in the wholesale merchant electric
of Wisconsin Public Service and Upper Peninsula Power and the regulated power generation industry, primarily in the midwest and northeastern
gas utility operations of Wisconsin Public Service. Wisconsin Public Service’s United States and adjacent portions of Canada. WPS Power Development’s
revenues are primarily derived from the service of electric and natural gas core competencies include power plant operation and maintenance, waste
retail customers in northeastern and central Wisconsin and an adjacent part disposal, and material condition assessment of assets. Revenues are derived
of Upper Michigan. Wisconsin Public Service also provides wholesale primarily through the sale of capacity and energy generated from plant
electric service to various customers, including municipal utilities, electric assets through wholesale outtake contracts and into liquid financial markets,
cooperatives, energy marketers, other investor-owned utilities, and a primarily the PJM (Pennsylvania, New Jersey, and Maryland), New York
municipal joint action agency. Portions of Wisconsin Public Service’s electric and NEPOOL (New England Power Pool) markets, at spot prices or day
and gas operations cannot be specifically identified as electric or gas and ahead prices.
instead are allocated using either actual labor hours, revenues, number of
The Holding Company and Other segment includes the operations
customers, or number of meters. Upper Peninsula Power derives revenues
of WPS Resources and WPS Resources Capital Corporation as holding
from the sale of electric energy in the Upper Peninsula of Michigan.
companies and the nonutility activities at Wisconsin Public Service
Our other reportable segments include WPS Energy Services and WPS Power and Upper Peninsula Power. The tables below present information for
Development. WPS Energy Services offers nonregulated natural gas, the respective years pertaining to our operations segmented by lines
electric and alternate fuel supplies as well as energy management and of business.
consulting services to retail and wholesale customers primarily in the
northeastern quadrant of the United States and adjacent portions of
Canada. Although WPS Energy Services has a widening array of products
and services, revenues are primarily derived through sales of electricity
and natural gas. WPS Energy Services’ marketing and trading operations
manage power and natural gas procurement as an integrated portfolio
with its retail and wholesale sales commitments. Electricity required to
fulfill these sales commitments was procured primarily from independent
generators, energy marketers, and organized electric power markets.
Natural gas was purchased from a variety of suppliers under daily,
monthly, seasonal, and long-term contracts with pricing delivery
and volume schedules to accommodate customer requirements.
WPS Energy Services’ customers include utilities, municipalities,
Deanna Francisco leads e-Business Development
and Services at Wisconsin Public Service. In 2003,
http://www.wisconsinpublicservice.com won an
Outstanding Web Site Award from the Web
Marketing Association for easy navigation and
customer-focused design.
W PS R E S O U R C E S CO R P O R ATI O N 85

Notes to Consolidated Financial Statements
Segments of Business (Millions) Regulated Utilities Nonutility and Nonregulated Operations
Electric Gas Total WPS Energy WPS Power Reconciling WPS Resources
2003 Utility * Utility * Utility * Services Development Other Eliminations Consolidated
Income Statement
External revenues $ 785.6 $398.1 $1,183.7 $3,063.2 $ 74.3 $ 0.1 $ – $4,321.3
Internal revenues 28.5 6.1 34.6 18.0 8.1 1.1 (61.8) –
Depreciation and decommissioning 112.8 14.3 127.1 1.8 8.9 0.6 – 138.4
Miscellaneous income 43.6 1.3 44.9 1.2 (5.0) 30.7 (8.2) 63.6
Interest expense 24.9 6.7 31.6 0.5 2.8 27.3 (6.6) 55.6
Provision for income taxes 33.9 9.2 43.1 17.4 (24.2) (2.6) – 33.7
Discontinued operations – – – 0.3 (16.3) – – (16.0)
Cumulative effect of change
in accounting principle – – – 3.3 (0.3) – 0.2 3.2
Income available for common shareholders 60.0 15.7 75.7 29.0 (7.9) (2.1) – 94.7
Balance Sheet
Total assets 2,102.1 497.0 2,599.1 1,162.7 373.8 305.0 (148.3) 4,292.3
Cash expenditures for long-lived assets 131.0 40.7 171.7 1.4 3.3 (0.2) – 176.2
* Includes only utility operations. Nonutility operations are included in the Other column.
Segments of Business (Millions) Regulated Utilities Nonutility and Nonregulated Operations
Electric Gas Total WPS Energy WPS Power Reconciling WPS Resources
2002 Utility * Utility * Utility * Services Development Other Eliminations Consolidated
Income Statement
External revenues $ 741.6 $308.7 $1,050.3 $358.8 $ 51.8 $ 0.2 $ – $1,461.1
Internal revenues 21.5 2.0 23.5 2.4 7.6 1.1 (34.6) –
Depreciation and decommissioning 72.6 13.3 85.9 1.1 7.3 0.5 – 94.8
Miscellaneous income 6.3 0.3 6.6 1.8 27.7 19.8 (8.1) 47.8
Interest expense 28.7 6.3 35.0 1.6 3.4 22.4 (6.6) 55.8
Provision for income taxes 31.9 12.4 44.3 6.6 (18.3) (3.6) (0.3) 28.7
Discontinued operations – – – 0.6 (6.6) – – (6.0)
Income available for common shareholders 61.0 18.4 79.4 11.0 24.0 (5.0) – 109.4
Balance Sheet
Total assets 1,816.7 513.9 2,330.6 877.2 358.1 172.7 (67.4) 3,671.2
Cash expenditures for long-lived assets 164.3 34.0 198.3 0.8 8.2 3.0 – 210.3
* Includes only utility operations. Nonutility operations are included in the Other column.
Segments of Business (Millions) Regulated Utilities Nonutility and Nonregulated Operations
Electric Gas Total WPS Energy WPS Power Reconciling WPS Resources
2001 Utility * Utility * Utility * Services Development Other Eliminations Consolidated
Income Statement
External revenues $ 654.4 $320.6 $ 975.0 $322.3 $ 47.9 $ 0.2 $ – $1,345.4
Internal revenues 21.3 1.0 22.3 4.3 8.7 1.1 (36.4) –
Depreciation and decommissioning 66.4 11.7 78.1 0.7 4.9 0.4 – 84.1
Miscellaneous income 14.5 0.2 14.7 1.1 2.6 27.2 (8.1) 37.5
Interest expense 28.3 6.0 34.3 0.2 4.2 23.0 (8.3) 53.4
Provision for income taxes 31.6 5.9 37.5 3.5 (29.9) (1.8) (0.1) 9.2
Discontinued operations – – – 0.9 (7.8) – – (6.9)
Income available for common shareholders 58.8 8.9 67.7 6.4 2.3 1.3 (0.1) 77.6
Balance Sheet
Total assets 1,725.9 482.6 2,208.5 720.1 323.1 167.7 (72.9) 3,346.5
Cash expenditures for long-lived assets 175.8 24.9 200.7 10.9 27.7 5.0 – 244.3
* Includes only utility operations. Nonutility operations are included in the Other column.
86 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
2003 2002 2001
Long-Lived Long-Lived
Geographic Information (Millions) Revenues Assets Revenues Assets Revenues
United States $3,749.6 $2,618.4 $1,407.4 $2,358.5 $1,343.1
Canada 571.7 24.1 53.7 25.5 2.3
Total $4,321.3 $2,642.5 $1,461.1 $2,384.0 $1,345.4
N OT E 2 5 — Q UA RT E R LY F I N A N C I A L I N F O R M AT I O N ( U N AU D I T E D )
Three Months Ended
2003
(Millions, except for share amounts) March June September December Total
Operating revenues (1) $1,281.8 $971.9 $989.3 $1,078.3 $4,321.3
Operating income 57.4 10.5 52.5 10.3 130.7
Income from continuing operations 35.7 9.2 33.3 32.4 110.6
Net income before cumulative effect of change in accounting principles 30.6 3.5 34.8 25.7 94.6
Income available for common shareholders 33.0 2.7 34.1 24.9 94.7
Average number of shares of common stock (basic) 32.1 32.4 32.6 34.5 33.0
Average number of shares of common stock (diluted) 32.4 32.7 32.9 34.8 33.2
Earnings per common share (basic) (2)
Income from continuing operations $1.09 $0.26 $1.00 $0.92 $3.26
Net income before cumulative effect of change in accounting principles 0.93 0.08 1.05 0.72 2.77
Earnings per common share (basic) 1.03 0.08 1.05 0.72 2.87
Earnings per common share (diluted) (2)
Income from continuing operations $1.08 $0.26 $0.99 $0.91 $3.24
Net income before cumulative effect of change in accounting principles 0.92 0.08 1.04 0.72 2.75
Earnings per common share (diluted) 1.02 0.08 1.04 0.72 2.85
2002
(Millions, except for share amounts) March June September December Total
Operating revenues (1) $380.3 $310.5 $350.6 $419.7 $1,461.1
Operating income 48.8 22.8 45.7 37.9 155.2
Income from continuing operations 32.1 23.6 29.9 32.9 118.5
Income available for common shareholders 28.1 21.7 30.5 29.1 109.4
Average number of shares of common stock (basic) 31.4 31.7 31.9 32.0 31.7
Average number of shares of common stock (diluted) 31.6 31.9 32.1 32.2 32.0
Earnings per common share (basic) (2)
Income from continuing operations $1.00 $0.72 $0.91 $1.01 $3.64
Earnings per common share (basic) 0.89 0.68 0.96 0.91 3.45
Earnings per common share (diluted) (2)
Income from continuing operations $0.99 $0.71 $0.91 $1.00 $3.61
Earnings per common share (diluted) 0.89 0.68 0.95 0.90 3.42
(1) Revenue have been reclassified, including revenues related to discontinued operation, Because of various factors, which affect the utility business, the quarterly results
to conform to current year presentation. of operations are not necessarily comparable.
(2) Earnings per share for the individual quarters do not total the year ended earnings per
share amount because of the significant changes to the average number of shares
outstanding and changes in incremental issuable shares throughout the year.
W PS R E S O U R C E S CO R P O R ATI O N 87

Report Of Management
Independent Auditors’ Report
WPS Resources Corporation
The management of WPS Resources Corporation has To the Shareholders and Board of Directors of
prepared, and is responsible for the integrity of, the WPS Resources Corporation
consolidated financial statements and related financial
We have audited the accompanying consolidated
information encompassed in this Annual Report. Our
balance sheets of WPS Resources Corporation and
consolidated financial statements have been prepared
subsidiaries (the “Company”), as of December 31, 2003
in conformity with generally accepted accounting
and 2002, and the related consolidated statements
principles, and financial information included elsewhere
of income, common shareholders’ equity, and cash
in this report is consistent with our consolidated
flows for each of the three years in the period ended
financial statements.
December 31, 2003. These financial statements are
We maintain a system of internal accounting control the responsibility of the Company’s management.
designed to provide reasonable assurance that our assets Our responsibility is to express an opinion on these
are safeguarded and that transactions are properly financial statements based on our audits.
executed and recorded in accordance with authorized
We conducted our audits in accordance with auditing
procedures. The system is monitored by management
standards generally accepted in the United States of
and our internal auditing department. Written policies
America. Those standards require that we plan and
and procedures have been developed to support the
perform the audit to obtain reasonable assurance about
internal controls in place and are updated as necessary.
whether the financial statements are free of material
Our internal auditing department reviews and assesses misstatement. An audit includes examining, on a test
the effectiveness of selected internal controls, and reports basis, evidence supporting the amounts and disclosures in
to management as to its findings and recommendations the financial statements. An audit also includes assessing
for improvement. Management takes appropriate actions the accounting principles used and significant estimates
to correct deficiencies as they are identified. made by management, as well as evaluating the overall
financial statement presentation. We believe that our
Our Board of Directors has established an Audit
audits provide a reasonable basis for our opinion.
Committee, comprised entirely of independent directors,
which actively assists our Board in its role of overseeing In our opinion, such consolidated financial statements
our financial reporting process and system of internal present fairly, in all material respects, the financial
control. Our independent public accountants are hired position of WPS Resources Corporation and subsidiaries
by and have full and free access to the Audit Committee. as of December 31, 2003 and 2002, and the results of
We also have a Disclosure Committee to oversee the their operations and their cash flows for each of the
adequacy of our financial reporting and disclosure. three years in the period ended December 31, 2003,
in conformity with accounting principles generally
The accompanying consolidated financial statements
accepted in the United States of America.
have been audited by Deloitte & Touche, independent
public accountants, whose report follows. As discussed in Note 1 to the consolidated financial
statements, effective January 1, 2003, the Company
changed its method of accounting for certain energy
trading contracts to adopt EITF 02-3, “Issues Involved
Larry L. Weyers in Accounting for Derivative Contracts Held for Trading
Chairman, President, and Chief Executive Officer Purposes and Contracts Involved in Energy Trading
and Risk Management Activities.” As discussed in
Notes 1 and 16 to the consolidated financial statements,
effective January 1, 2003, the Company changed its
Joseph P. O’Leary method of accounting for asset retirement obligations
Senior Vice President and Chief Financial Officer
to adopt Statement of Financial Accounting Standards
No.143,“Accounting for Asset Retirement Obligations.”
Diane L. Ford
Vice President - Controller and Chief Accounting Officer
Deloitte & Touche LLP
Milwaukee, Wisconsin
March 10, 2004
88 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
Financial Statistics
Scott Bunker (foreground), Distribution
Operations Center Dispatcher; Steven Heller,
System Operating Supervisor; and Neil
Hermus, Superintendent of the Distribution
Operations Center; monitor gas and electric
distribution facilities from the Green Bay
headquarters of Wisconsin Public Service. They
quickly respond to problems and maintain
service to customers.
As of or for Year Ended December 31
(Millions, except per share amounts, stock price, return on
average equity, and number of shareholders and employees) 2003 2002 2001 2000 1999
Total revenues * $4,321.3 $1,461.1 $1,345.4 $1,094.1 $1,086.5
Income from continuing operations 110.6 118.5 87.6 75.6 61.9
Income available for common shareholders 94.7 109.4 77.6 67.0 59.6
Total assets 4,292.3 3,671.2 3,346.5 3,202.7 2,185.1
Preferred stock of subsidiaries 51.1 51.1 51.1 51.1 51.2
Long-term debt and capital lease obligation
(excluding current portion) 871.9 824.4 727.8 660.0 584.5
Shares of common stock (less treasury stock
and shares in deferred compensation trust)
Outstanding 36.6 31.8 31.1 26.4 26.8
Average 33.0 31.7 28.2 26.5 26.6
Earnings per common share (basic)
Income from continuing operations $3.26 $3.64 $3.00 $2.74 $2.21
Earnings per common share 2.87 3.45 2.75 2.53 2.24
Earnings per common share (diluted)
Income from continuing operations 3.24 3.61 2.99 2.74 2.21
Earnings per common share 2.85 3.42 2.74 2.53 2.24
Dividend per share of common stock 2.16 2.12 2.08 2.04 2.00
Stock price at year-end $46.23 $38.82 $36.55 $36.81 $25.13
Book value per share $27.40 $24.62 $23.02 $20.76 $20.01
Return on average equity 11.50% 14.60% 12.80% 12.30% 11.30%
Number of common stock shareholders 22,172 22,768 23,478 24,029 25,020
Number of employees 3,080 2,963 2,856 3,030 2,900
* Revenues increased $2,860.2 million in 2003 compared to 2002. Approximately $1,127 million of the increase relates to WPS Energy Services’ required adoption of
Issue No. 02-03,“Issues Involved in Accounting for Derivative Contracts Held for Trading Purposes and Contracts Involved in Energy Trading and Risk Management Activities,”
effective January 1, 2003. Volume growth driven by WPS Energy Services’ acquisition of a retail natural gas business in Canada accounted for another $500 million
of the increase. The remaining increase in revenues was primarily related to increased natural gas prices at Wisconsin Public Service and WPS Energy Services and
electric rate increases at the utilities.
W PS R E S O U R C E S CO R P O R ATI O N 89

Board of Directors *
Richard A. Bemis Albert J. Budney, Jr. Ellen Carnahan Robert C. Gallagher Kathryn M.
Age 62 Age 56 Age 48 Age 65 Hasselblad-Pascale
Sheboygan Falls, Cazenovia, New York Chicago, Illinois Green Bay, Wisconsin Age 55
Wisconsin Former President Managing Director Chairman of the Board Green Bay, Wisconsin
President and Chief Niagara Mohawk William Blair Capital Associated Banc-Corp Managing Partner
Executive Officer Holdings, Inc. and Partners, LLC Hasselblad Machine
(Director since 1992)
Bemis Manufacturing Niagara Mohawk (Director since 2003) Company, LLP
Company Power Corporation Compensation Committee
Governance Committee (Director since 1987)
(Director since 1983) (Director since 2002) Financial Committee
Compensation
Audit Committee (Chair) Audit Committee Committee (Chair)
Governance Committee
(Chair)
Officers **
WPS Resources Corporation Wisconsin Public Service Corporation
Larry L. Weyers Neal A. Siikarla Larry L. Weyers Charles A. Cloninger
Chairman, President, and Vice President Chairman, President, and Assistant Vice President -
Chief Executive Officer Age 56/Years of service 5 Chief Executive Officer Operations and Engineering
Age 58/Years of service 18 Age 58/Years of service 18 Age 45/Years of service 22
Bernard J. Treml
Thomas P. Meinz Vice President - Thomas P. Meinz James F. Schott
Senior Vice President - Human Resources Senior Vice President - Assistant Vice President -
Public Affairs Age 54/Years of service 31 Public Affairs Regulatory Affairs
Age 57/Years of service 34 Age 57/Years of service 34 Age 46/Years of service 1
William L. Bourbonnais, Jr.
Phillip M. Mikulsky Assistant Vice President - Joseph P. O’Leary Barth J. Wolf
Senior Vice President - Transmission Senior Vice President and Secretary and Manager -
Development Age 58/Years of service 35 Chief Financial Officer Legal Services
Age 55/Years of service 32 Age 49/Years of service 2 Age 46/Years of service 15
Barbara A. Nick
Joseph P. O’Leary Assistant Vice President - Lawrence T. Borgard Bradley A. Johnson
Senior Vice President and Corporate Services Vice President - Distribution Treasurer
Chief Financial Officer Age 45/Years of service 19 and Customer Service Age 49/Years of service 24
Age 49/Years of service 2 Age 42/Years of service 19
Glen R. Schwalbach Jerome J. Myers ***
Charles A. Schrock Assistant Vice President - Diane L. Ford Assistant Treasurer
Senior Vice President Corporate Planning Vice President - Controller Age 58/Years of service 35
Age 50/Years of service 24 Age 58/Years of service 35 and Chief Accounting Officer
Janet K. McKee
Age 50/Years of service 28
Diane L. Ford Barth J. Wolf Assistant Treasurer
Vice President - Controller and Secretary and Manager - David W. Harpole Age 50/Years of service 7
Chief Accounting Officer Legal Services Vice President - Energy Supply
Pamela R. Clausen
Age 50/Years of service 28 Age 46/Years of service 15 Age 48/Years of service 26
Assistant Controller
Richard E. James Bradley A. Johnson Bernard J. Treml Age 53/Years of service 16
Vice President - Treasurer Vice President -
Corporate Planning Age 49/Years of service 24 Human Resources
Age 50/Years of service 28 Age 54/Years of service 31
90 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
James L. Kemerling John C. Meng William F. Protz, Jr. Larry L. Weyers
Age 64 Age 59 Age 59 Age 58
Wausau, Wisconsin Green Bay, Wisconsin Northfield, Illinois Green Bay, Wisconsin
President and Chief Chairman of the Board Consultant and Former Chairman, President,
Executive Officer Schreiber Foods, Inc. President and Chief and Chief Executive
Riiser Oil Company, Inc. Executive Officer Officer
(Director since 2000)
Chairman and Chief Santa’s Best WPS Resources Corporation
Compensation Committee
Executive Officer (Director since 2001) (Director since 1996)
Financial Committee
Award Hardwood Floors, LLP Audit Committee * Age, title, and committee
(Director since 1988) Governance Committee membership are as of
December 31, 2003.
Financial Committee
(Chair)
Upper Peninsula Power Company
Phillip M. Mikulsky Michael W. Charles Phillip M. Mikulsky Thomas P. Meinz
Chief Executive Officer Vice President - Asset President Chairman and
Age 55/Years of service 32 Development Age 55/Years of service 32 Chief Executive Officer
Age 54/Years of service 26 Age 57/Years of service 34
Mark A. Radtke Terry P. Jensky
President Bruce A. Rizor Vice President - Operations Lawrence T. Borgard
Age 42/Years of service 20 Vice President - Structured Age 50/Years of service 26 President
Energy Trading Age 42/Years of service 19
Daniel J. Verbanac Barth J. Wolf
Age 42/Years of service 4
Senior Vice President Secretary Gary W. Erickson
Age 40/Years of service 19 Ruqaiyah Z. Stanley Age 46/Years of service 15 Vice President
Vice President Age 61/Years of service 35
Mark W. Stiers Bradley A. Johnson
Age 49/Years of service 5
Chief Operating Officer - Treasurer Barth J. Wolf
Quest Energy Barth J. Wolf Age 49/Years of service 24 Secretary
Age 41/Years of service 1 Secretary Age 46/Years of service 15
George R. Wiesner
Age 46/Years of service 15
Richard J. Bissing Controller Bradley A. Johnson
Vice President Bradley A. Johnson Age 46/Years of service 19 Treasurer
Age 43/Years of service 14 Treasurer Age 49/Years of service 24
Age 49/Years of service 24
Darrell W. Bragg
Vice President Gregory C. Lower
Age 44/Years of service 8 Controller
Age 49/Years of service 2 ** Title, age, and years of service
Boris A. Brevnov
are as of December 31, 2003.
Vice President - Business Years of service take into
Development and consideration service with
Implementation WPS Resources Corporation
Age 35/Years of service 1 or a system company.
*** Retired December 31, 2003.
W PS R E S O U R C E S CO R P O R ATI O N 91

Investor Information
Shareholder Inquiries Dividends
Our transfer agent, American Stock Transfer & Trust We have paid quarterly cash dividends on our common stock
Company, can be reached via telephone between the hours since 1953, and we expect to continue that trend. Future
of 7:00 a.m. and 6:00 p.m., Central time, Monday through dividends are dependent on regulatory limitations, earnings,
Thursday, or 7:00 a.m. and 4:00 p.m., Central time, Friday, capital requirements, cash flows, and other financial
by calling 800-236-1551. You also have direct access to your considerations.
account through the Internet at http://www.amstock.com.
Anticipated record and payment dates for common stock
Our Investor Relations staff is also available to assist you dividends paid in 2004 are:
by calling 920-433-1050 between the hours of 8:00 a.m.
and 4:30 p.m., Central time, Monday through Friday.
Record Date Payment Date
February 27 March 20
Mailing addresses and Internet addresses, along with additional May 28 June 19
telephone numbers, are listed on the back cover of this report. August 31 September 20
November 30 December 20
Common Stock
The New York Stock Exchange is the principal market for As a record holder of our common stock, you may have your
WPS Resources Corporation common stock, which trades dividends electronically deposited in a checking or savings
under the ticker symbol of WPS. account at a financial institution. If you are a record holder
and your dividends are not electronically deposited, we will
You may purchase or sell mail your dividend check directly to you.
our common stock through
our Stock Investment Plan If you are a record holder of our common stock and your
described below or through dividend check is not received on the payment date, wait
brokerage firms and banks approximately ten days to allow for delays in mail delivery.
that offer brokerage services. After that time, contact American Stock Transfer & Trust
Company to request a replacement check.
Common stock certificates
issued before September 1, 1994, bear the name of Wisconsin Stock Investment Plan
Public Service Corporation and remain valid certificates.
We maintain a Stock Investment Plan for
Effective December 16, 1996, each share of our common stock the purchase of common stock, which
has a Right associated with it, which would entitle the owner allows persons who are not already
to purchase additional shares of common stock under specified shareholders (and who are not employees
terms and conditions. The Rights are not presently exercisable. of WPS Resources or its system companies)
The Rights would become exercisable ten days after a person to become participants by making a
or group (1) acquires 15% or more of WPS Resources minimum initial cash investment of
Corporation’s common stock or (2) announces a tender offer $100. Our Plan enables you to maintain
to acquire at least 15% of WPS Resources’ common stock. registration with us in your own name
rather than with a broker in “street name.”
On December 31, 2003, we had 36,621,976 shares of common
stock outstanding,which were owned by 22,172 holders of record. The Stock Investment Plan also provides you with options
for reinvesting your dividends and making optional cash
Year Ended December 31 Dividends Price Range purchases of common stock directly through the Plan without
(By Quarter) Per Share High Low paying brokerage commissions, fees, or service charges.
2003 1st quarter $ .535 $41.18 $36.80 Optional cash payments of not less than $25 per payment
2nd quarter .535 44.28 39.53 may be made subject to a maximum of $100,000 per calendar
3rd quarter .545 41.60 38.28
4th quarter .545 46.80 40.94 year. An automatic investment option allows you to authorize
$2.160 the deduction of payments from your checking or savings
2002 1st quarter $ .525 $39.93 $35.65 account automatically once each month, on the third day of
2nd quarter .525 42.68 37.00 the month, by electronic means for investment in the Plan.
3rd quarter .535 41.12 30.47
4th quarter .535 39.95 32.64 Cash for investment must be received by the 3rd or
$2.120
18th day of the month for investment, which generally
92 W PS R E S O U R C E S CO R P O R ATI O N

The energy within
commences on or about the 5th or 20th day of the month, or It is anticipated that 2004 quarterly earnings information will
as soon thereafter as practicable. be released on April 21, July 21, and October 20 in 2004 and
on January 26 in 2005.
The shares you hold in our Stock Investment Plan may be sold
by the agent for the Plan as you direct us, or you may request You may obtain, without charge, a copy of our 2003 Form10-K,
a certificate for sale through a broker you select. We will without exhibits, as filed with the Securities and Exchange
accumulate sale requests from participants and, approximately Commission, by contacting the Corporate Secretary, at the
every five business days, will submit a sale request to the corporate office mailing address listed on the back cover,
independent broker-dealer on behalf of those participants. or by using our Web site.
Participation in the Stock Investment Plan is being offered
only by means of a prospectus. If you would like a copy of
Internet
the Stock Investment Plan prospectus, you may use American Visit our award-winning Web
Stock Transfer’s Web site, call American Stock Transfer at site at http://www.wpsr.com
800-236-1551, contact us via e-mail by using our e-mail to find a wealth of information
address of investor@wpsr.com, or you may order or about our company and
download the prospectus and enrollment forms using the its subsidiaries.
Internet at http://www.wpsr.com under Investor Information.
The site will give you instant access to Annual Reports, SEC
filings, proxy statements, financial news, presentations, news
Safekeeping Services releases, career opportunities, and much more. You may also
As a participant in the Stock Investment Plan, you may download a copy of the prospectus for the Stock Investment
transfer shares of common stock registered in your name into Plan and the associated forms for participation in the Plan.
a Plan account for safekeeping. Contact American Stock
The site is updated regularly, so visit it often.
Transfer or our Investor Relations staff for further details.
Preferred Stock of Subsidiary Annual Shareholders’ Meeting
Our Annual Shareholders’ Meeting will be held on
The preferred stock of Wisconsin Public Service Corporation
Thursday, May 13, 2004, at 10:00 a.m. at the Weidner Center,
trades on over-the-counter markets. Payment and record dates
University of Wisconsin – Green Bay, 2420 Nicolet Drive,
for preferred stock dividends paid in 2004 are:
Green Bay, Wisconsin.
Record Date Payment Date
Proxy statements for our May 13, 2004, Annual Shareholders’
January 15 February 1
Meeting were mailed to shareholders of record on April 8, 2004.
April 15 May 1
July 15 August 1
October 15 November 1 Annual Report
If you or another member of your household receives
more than one Annual Report because of differences in
Stock Transfer Agent and Registrar the registration of your accounts, please contact American
Stock Transfer & Trust Company so that account mailing
Questions about transferring common or preferred stock, lost
instructions can be modified accordingly.
certificates, or changing the name in which certificates are
registered should be directed to our transfer agent, American This Annual Report is prepared primarily for the information
Stock Transfer & Trust Company, at the addresses or of our shareholders and is not given in connection with the
telephone numbers listed on the back cover. sale of any security or offer to sell or buy any security.
Address Changes Corporate Governance Information
If your address changes, write to American Stock Transfer & Corporate governance information, including our Corporate
Trust Company at the address on the back of this report or Governance Guidelines, our Code of Conduct, and charters
use their Web site at http://www.amstock.com. for the committees of our Board of Directors, is available
on our Web site at http://www.wpsr.com under Investor
Availability of Information Information. You may also obtain the information by written
Company financial information is available on the Internet. request to the Corporate Secretary at the mailing address for
The address is http://www.wpsr.com. the corporate office indicated on the back cover of this report.
W PS R E S O U R C E S CO R P O R ATI O N 93

WPS Resources Corporation
Corporate Office Transfer Agent and Registrar
700 North Adams Street For General Information
Green Bay, WI 54301 American Stock Transfer & Trust Company
Mailing Address 59 Maiden Lane
WPS Resources Corporation New York, NY 10038
P. O. Box 19001 Web Site
Green Bay, WI 54307-9001 http://www.amstock.com
Telephone E-Mail
920-433-4901 info@amstock.com
Fax Telephone
920-433-1526 800-236-1551 (toll free)
Web Site 718-921-8156 (world wide)
http://www.wpsr.com Fax
718-236-2641
Investor Relations
For Dividend Reinvestment and
WPS Resources Corporation Direct Stock Purchase
700 North Adams Street
Green Bay, WI 54301 American Stock Transfer & Trust Company
P. O. Box 922
Mailing Address Wall Street Station
WPS Resources Corporation New York, NY 10269-0560
P. O. Box 19001
Green Bay, WI 54307-9001 Telephone
800-236-1551 (toll free)
Telephone
920-433-1050 or
920-433-1857
E-Mail
investor@wpsr.com
Financial Inquiries
Mr. Joseph P. O’Leary
Senior Vice President and Wisconsin Utility Investors, Inc. Printed on paper that contains
Chief Financial Officer Wisconsin Utility Investors, Inc. 10% post-consumer fiber,
WPS Resources Corporation (“WUI”) is an independent, non-profit using environmentally
P. O. Box 19001 organization representing the collective conscientious vegetable inks.
Green Bay, WI 54307-9001 voices of more than 16,000 shareholders
Subjects in photos were not placed in
in Wisconsin utilities. It monitors and
Telephone unsafe conditions for the production
evaluates industry issues and trends and of this Annual Report.
920-433-1463 is a resource for its members, regulators,
and the public. WUI can be reached by
calling 608-663-5813 or by e-mail at
© 2004 WPS Resources Corporation
Stock Exchange Listing contact@wuiinc.org.
New York Stock Exchange Equal Employment Opportunity
Ticker Symbol WPS Resources Corporation is committed
WPS to equal employment opportunity for
all qualified individuals without regard
Listing Abbreviation to race, creed, color, religion, sex, age,
WPS Res national origin, sexual orientation,
disability, or veteran status. To that end,
we support and will cooperate fully
with all applicable laws, regulations, and
executive orders in all of our employment
policies, practices, and decisions.